Senator the Hon. Mathias Cormann
Minister for Finance and the Public Service
Leader of the Government in the Senate
Senator for Western Australia
MATT TAYLOR: Let us get more and bring in Mathias Cormann the Finance Minister of Australia, with me here in the studio. Great to see you, thanks very much for coming in. As I mentioned, the best Budget position that we have seen in around about a decade. How much of it was down to luck, with commodity prices doing the right thing, of course we saw some strong performances coming through on the corporate tax receipt side?
MATHIAS CORMANN: This is the result of five and a half years of hard work. Commodity prices are much lower than they were when we came into Government. Just to pick the iron ore price for example, that was at $120 a tonne back in September 2013 when we came into Government. We are basing our revenue forecasts on an assumption of $55 a tonne today. So when you make more prudent and more cautious assumptions in terms of your revenue forecasts, you give yourself a better chance to outperform your expectations. The situation we inherited from our predecessors, they expected the best and were not able to deal with some of the downsides. The truth is, we inherited a weakening economy, rising unemployment and a rapidly-deteriorating Budget position. Today in Australia the economy is stronger, the growth outlook is better, employment growth is stronger, the unemployment rate is lower and the Budget is in a stronger and improving position.
MATT TAYLOR: Okay, let us talk about the growth expectations then. As I mentioned, three per cent over most of the forward estimates, yet when we had that Q3 number just a couple weeks ago, we saw the year-on-year growth level below three per cent. There are some economists that we were speaking to who suggest that perhaps the second quarter of the year was going to be the peak when it comes to growth in Australia, so how confident are you that we will be able to see three per cent growth over the next four years?
MATHIAS CORMANN: We are optimistic. In 2018-19 we are dealing with the impact of a significant drought, which is having a material impact on our expected agricultural exports. So that is fundamentally a function of that. But our expectation is for growth to return to the three per cent level from 2019-20 onwards. If you compare Australia’s economic growth right now internationally, we are performing more strongly than the OECD average, more strongly than any of the G7 economies with the exception of the United States.
MATT TAYLOR: Let us talk about wages because we often, when we chat to you at Budget time and at MYEFO, talk about wages and have of course been pointing out that they have been stubbornly low. It is just not an issue that is peculiar to Australia, it is something that we are seeing in a lot of economies around the world. I know that you were just at the G20 meeting in Argentina. What was the message there, what are other Finance Ministers trying to do or hoping to do to try and get a pick-up in wages, which we want to see globally?
MATHIAS CORMANN: Well, wages growth in the US has picked up and we are seeing wages growth in Australia pick up. The truth is when we were dealing with a weakening economy and rising unemployment, as we inherited from our predecessors, rising unemployment means that wages will be lower than they otherwise would be. But under our economic management today, with the unemployment rate coming down to five per cent, that is the ingredient to drive stronger wages growth into the future and we have already started to see that, as excess supply in the labour market continues to reduce, we would expect wages growth to continue to increase into the future.
MATT TAYLOR: We are obviously setting up for the Budget that is going to come in early April, ahead an election sometime, potentially around May of next year. There is $9 billion in revenue unallocated, a lot of talk about are these are going to be election sweeteners, are they going to be tax cuts? Given that there is some uncertainty out there about the global economy, we look at the trade war between China and the US, talk that there may be a slowdown in the United States, a potential recession in 2020. Wouldn’t be better to keep the money in the bank and save it for a rainy day rather than spend it ahead of an election? And if you are cynic, people may see that as trying to essentially buy votes?
MATHIAS CORMANN: Tax cuts is not Government spending money. Tax cuts means leaving Australians with more of their own money to spend as they see fit. What we have done since the Budget about seven months ago is, we have legislated about $144 billion worth of personal income tax cuts for hardworking families across Australia. We have made a commitment that we will not allow the tax burden in our economy go above 23.9 per cent as a share of the GDP. Really the number you mention is a reflection of that. There is scope for us to provide further tax relief and once we are in a position to make relevant announcements we will.
MATT TAYLOR: Alright, final question before we let you go, form where you are sitting, what is the biggest challenge for the Australian economy as the Finance Minister? What concerns you the most, is it outside of Australia? Is it the falling housing market that we are seeing here? The trade war? The United States?
MATHIAS CORMANN: We are a globally focussed, open trading economy and our future economic success, the future opportunities for Australians today and into the future to get ahead depends on our capacity to sell as many Australian products and services in markets around the world as possible. So we continue to work very hard to ensure that, domestically our economy is competitive and that we have the best possible access for our products and services to markets around the world. That is very much our focus.
MATT TAYLOR: The slow down we are seeing in housing though, of course we heard from the OECD just in the last couple of weeks warning that if we do see a more protracted slow down there could be a risk to financial institutions. That is not a concern?
MATHIAS CORMANN: It is funny, when we spoke about these matters in years gone by, you asked me whether we were concerned about the property market overheating. That was in the context of supply not keeping up with demand. Now the supply and demand equation is somewhat more balanced and you ask me a question in a different way. I would have thought in terms of housing affordability people would be supportive of some of the adjustments that have taken place. They are orderly adjustments. They are not dramatic. We very much need to ensure that our policy settings continue to support the level of growth and the level of additional investment required to make sure housing supply keeps up with demand into the future.
MATT TAYLOR: We are out of time. Thank you very much for coming in to chat to us. I am glad that you remember some of our conversations from years gone by, Mathias Cormann the Finance Minister of Australia.