Senator the Hon. Mathias Cormann
Minister for Finance and the Public Service
Leader of the Government in the Senate
Senator for Western Australia
Date: Friday, 1 February 2019
KIERAN GILBERT: Let’s bring in the Finance Minister Mathias Cormann as we speak to him every Friday. Good morning to you Minister.
MATHIAS CORMANN: Good morning.
KIERAN GILBERT: To put it bluntly, the Commission has come up and uncovered just disgraceful behaviour within the financial services sector. I think that everyone would agree with that. And really the Government will need to just have a forceful response doesn’t it?
MATHIAS CORMANN: We will be receiving the report today. As the Treasurer has announced the report will be released after 4:00pm, after the markets close, on Monday. We will be considering the report over the weekend. Our focus will be on making sure that consumers are appropriately protected. But we also need to ensure moving forward, that we can continue to have strong, stable and competitive banks. That is very important in our economy, for us to have strong and stable banks, where through the provision of credit future economic growth can continue to be facilitated.
LAURA JAYES: Your government were late converts to the need for the banking Royal Commission. Given what we have seen in the last year did any of it surprise you Mathias Cormann?
MATHIAS CORMANN: Firstly, on coming into Government it was very clear that in the wake of the global financial crisis a whole series of weaknesses had been exposed in our financial sector, which is why on coming into Government, we immediately commissioned the Financial Systems Inquiry, which led to a whole series of very important reforms. We have implemented the Bank Executive Accountability Regime. We have implemented the Australian Financial Complaints Authority. We have given additional powers and resources to ASIC and to APRA. We took action straight away. It is true that our focus initially was on pursuing reforms. The banking Royal Commission has been a very important part of that overall process. The final report will be received today. Let us take things from there, to continue to pursue the important reform effort, so that consumers are protected but that we also can continue to have a strong, stable and competitive banking sector here in Australia.
KIERAN GILBERT: And it is important to have that strong stable sector as you say. I don’t think anyone would question its stability. It is enormously strong. Certainly the four big players. Would you concede that the electorate does want a significant response here, because there is a lot of anger voters as to how so many Australians are being treated by the banks.
MATHIAS CORMANN: The electorate and indeed the Government want to ensure that consumers are appropriately protected, of course. We will take very careful note of all of the findings and recommendations in the banking Royal Commission report and respond strongly. We will focus on making sure that consumers are appropriately protected. We will focus to ensure that our banks can continue to be strong and stable and competitive, to be the key facilitators of future economic growth in our economy that we need them to be.
LAURA JAYES: Labor says it will adopt all of the recommendations when they are made public if in government, when we see the on Monday. Does the Government match that promise?
MATHIAS CORMANN: The Government takes proper process seriously. We believe it is important to actually receive and consider a report before making a blanket statement in response to it. We absolutely appreciate the important work that was done by the Banking Royal Commission. We will take the findings and recommendations very, very seriously. But we will respond to the recommendations after we have actually seen them.
KIERAN GILBERT: When well Chris Bowen wrote to Josh Frydenberg a few weeks ago saying that the report should be released as soon as possible after the Government received it to prevent any leaks from happening. That would have seen it released either after ASX trading closes today or possibly tomorrow, to prevent leaks like we saw on the bank tax, like we saw on the day of the Budget, which then led to an ASIC investigation. Why did the Government not say you would release it today or tomorrow?
MATHIAS CORMANN: We are releasing it as soon as possible. I think you will find that for a report of this nature, to just take a weekend to consider it before its public release is a very rapid release timetable. I do not think that anyone reasonable would have any issue with the proposition that receiving the report on the Friday, the Government intends to release it on the Monday. On Monday, mindful of the market sensitivities in relation to this report, we will be releasing it after the markets have closed. I think this is, I do not think that this is the main issue.
LAURA JAYES: Okay fair enough, but given the history that Kieran just detailed Mathias Cormann. Do you guarantee that there will be no leaks between now and Monday? And you take full responsibility for that.
MATHIAS CORMANN: The report will be received today. It will be treated with all of the appropriate and normal and usual confidentiality provisions between now and its public release. We are all very conscious of the market sensitive nature of the report. This will be handled in the appropriate way.
KIERAN GILBERT: The Government would be accountable for any leaks if they were to happen wouldn’t they now?
MATHIAS CORMANN: I am not envisaging any leaks. I am envisaging that this will be handled in the usual way as these sorts of matters are handled on a regular basis.
KIERAN GILBERT: But you can see why we are talking about it though because it is highly sensitive. There were billions of dollars in share losses that were incurred when the bank tax was leaked on the day of the Budget.
MATHIAS CORMANN: Again, I think I have answered your question. We will be releasing the report on Monday after the markets have closed. All will be revealed at that point.
LAURA JAYES: Okay, let’s talk more about the current economic situation. In the context of this banking Royal Commission we have reports today, AMP as well getting some $100 million a year from inactive accounts. Also how this banking Royal Commission is having an effect on lending in the flow of credit. Are you at all alarmed by that report about AMP, but also about reports that half of loans being applied for these days are approved?
MATHIAS CORMANN: Firstly, in relation to fees on superannuation accounts, the Government wants Australians saving for their retirement to be able to secure the best possible outcomes from those savings, to secure the best possible net returns. The person in the Australian democratic system that is standing in the way of lower fees on superannuation accounts is Bill Shorten. We have legislation in the Parliament right now. We have legislation in the Senate right now that would ban exit fees, that would further facilitate the consolidation of accounts, so that you do not have this situation that is described today of dormant accounts being slugged with excessive and inappropriate fees. But because Bill Shorten is standing up for the vested interests of a particular sector in the superannuation industry, rather than to prioritise the interests of Australians saving for their retirement that legislation has not yet been able to pass the Senate. So we call on Bill Shorten to side with Australians saving for their retirement, rather than to side with vested interests against Australians saving for their retirement and these sorts of issues can be addressed. Now in relation to lending, yes of course, we want to see banks continue to operate as the important facilitators in the economy that they are by providing credit. But by the same token a whole range of issues were revealed in the wake of the global financial crisis and subsequent inquiries. There was always going to be a level of response to that including in terms of lending practices.
KIERAN GILBERT: In the response to the Hayne report, you have got to receive it and consider it and so on, but do you envisage there is any prospect for putting more onus on the superannuation industry itself, even more responsibility on them to track down the holders of these dormant accounts, because $100 million in fees with one institution alone, the AMP, seems quite extraordinary.
MATHIAS CORMANN: There is actually a response to this. That is for Labor to get out of the way in the Senate and pass our legislation to ban relevant fees and to facilitate the consolidation of superannuation accounts. There is actually an answer in front of us right now. If Bill Shorten started to focus on the best interests of Australians saving for their retirement, rather than on the vested interests of one part of the superannuation industry, then this could be very efficiently addressed.
LAURA JAYES: Given Scott Morrison has labelled Chris Bowen arrogant. He says that he has given retirees a two fingered salute and after Chris Bowen said that if they do not like his policies, Labor’s policies, vote for someone else. Do you expect a big shift in Newspoll next time we see it?
MATHIAS CORMANN: There is a clear choice at the next election between our Government, which will continue to deliver stronger growth, more jobs and the best possible opportunity for all Australian families to get ahead. On the other hand, Chris Bowen and Bill Shorten, who when they were last in Government left behind a weakening economy, rising unemployment and a rapidly deteriorating Budget position. They have not learned from their past mistakes. They are again pursing a high taxing agenda, which would make the Australian economy weaker, which would make our country weaker and which would make Australians poorer and would put the Government in a weaker position to deal with the funding requirements for all of the essential services Australians rely on, which is precisely what happened when Bill Shorten and Chris Bowen were last in Government. They lost control of the Budget on the back of completely mismanaging fiscal policy and economic policy at that time. They are going about it the same way again.
LAURA JAYES: Do you accept though that we are talking about a minority though of retirees? Our colleague Peter Switzer earlier this morning told us there are some 900,000 retirees affected of 3.6 million across the nation.
MATHIAS CORMANN: The retirees affected by Labor’s retiree tax are those least able to afford it. The strange thing here is that if you are a wealthy retiree, one with strong income flows, you are able to claim the tax deduction. The poorer you are, the lower your income, the harder you get hit by this retiree tax. But the broader point is that Bill Shorten and Chris Bowen are pursuing a high taxing agenda, they are proposing to impose more than $200 billion in higher taxes on the Australian economy over the next decade. If it moves, they will tax it. That higher taxing agenda will weaken our …interrupted
KIERAN GILBERT: But just because someone has got a low taxable income does not mean they are poor.
MATHIAS CORMANN: Sorry?
KIERAN GILBERT: Just because someone has a low taxable income does not mean they have low net worth, the bottom line is superannuation earnings in the retirement phase are not taxed.
MATHIAS CORMANN: People cannot feed themselves from their family home Kieran. The point is this, if Bill Shorten and Chris Bowen get to impose this retiree tax, they will harm low income earners more than high income earners. High income earners will be able to claim the deduction, low income earners will not. It does not sound fair to me. Leaving that to one side, you have to look at the Labor approach in aggregate. More than $200 billion in higher taxes, which will lead to less investment, lower growth, fewer jobs, higher unemployment and lower wages. So if Bill Shorten and Chris Bowen get their way, they will make the Australian economy weaker, they will make our country weaker and they will make Australians poorer, including low income retirees who have invested in Australian shares.
LAURA JAYES: Seems everyone is on an election footing at the moment. Why do you think we have seen the emergence of centre-right, pro-climate independent candidates challenging sitting Liberal MPs?
MATHIAS CORMANN: There are independents running at every election. At the next election there is one choice and that is a choice between a continuation of a Liberal-National Government on one hand, keeping the Australian economy strong and indeed making it stronger. Or a high taxing Shorten Labor government, which would make the economy weaker, which would make our country weaker and would make Australians poorer. So at the next election the question for Australians is do they want policies that will give them the best possible opportunity to get ahead and will help ensure the Government can sustainably afford to fund the essential services Australians rely on under us or the high taxing, economy destroying, job destroying agenda of Bill Shorten.
KIERAN GILBERT: Finance Minister we will talk to you next week, thanks.
MATHIAS CORMANN: Always good to talk to you.