Senator the Hon. Mathias Cormann
Minister for Finance and the Public Service
Leader of the Government in the Senate
Senator for Western Australia
FRAN KELLY: Finance Minister Mathias Cormann has had a big hand in drafting this Budget document, which will be the first in more than a decade to unveil a surplus. Mathias Cormann joins me in our Parliament House studios. Minister, welcome back to Breakfast.
MATHIAS CORMANN: Good morning. Good to be back.
FRAN KELLY: The Budget tomorrow will be followed by the election five or six weeks later. Governments rarely get a bounce from Budgets these days, so what is it in tomorrow night’s Budget that you think will impress the voters enough to vote for you in May?
MATHIAS CORMANN: What the Budget tomorrow will show is that the Coalition has been successful over the last five and a half years in making the economy stronger, creating more jobs, driving the unemployment rate down and putting the Budget on a stronger and improving trajectory for the future, so that all of the essential services Australians rely on can be funded, funding can be guaranteed in the Budget. People will remember that when Bill Shorten and Chris Bowen were last in Government, they left behind a weakening economy, rising unemployment and a rapidly deteriorating Budget position. We have been able to turn that situation around. This is not the time to take risks with a high-taxing, anti-business, class warfare, central-planning, central-command agenda that would make the economy weaker and would make all Australians poorer.
FRAN KELLY: The headline of tomorrow night’s Budget will undoubtedly be the surplus, but I mean you know you made a few claims there but how much has the Government actually had to do with delivering that first surplus since Peter Costello’s Budget in 2007? It is thanks to high prices for coal and iron ore and the underspend in the NDIS isn’t it?
MATHIAS CORMANN: That is completely false. Firstly, the iron ore price is actually still lower than what it was when we came into Government in September 2013…interrupted
FRAN KELLY: Yeah but it has bounced back in the past 12 months.
MATHIAS CORMANN: You cannot have it both ways. When we came into Government, the iron ore price was $120 a tonne. It is now down to $80 a tonne or thereabouts, so significantly lower. But yes, you are right, our revenue forecasts, our revenue assumptions are based on much more responsible, much more cautious, conservative forecasting assumptions than Labor ever did. Labor assumed and hoped for the best, spent all the money they thought they would raise and then of course ended up in trouble. Labor cannot manage money. What we have done, we have controlled expenditure growth, obviously much better. Expenditure growth under our period in Government has been less than two per cent all the way through, the lowest expenditure growth of any Government over the last 50 years. Under Labor that was double. Under Labor, expenditure was headed for 26.5 per cent as a share of the economy and rising. Under us, we have been able to bring that down to below 25 per cent and if you look at the half-yearly Budget update, you will be able to see that we are projected, in that, to come down below the 30 year average when it comes to Government expenditure as a share of the economy in the half-yearly Budget update, down to 24.6 per cent at the end of the forward estimates. Now these numbers will be updated tomorrow, but any suggestion…interrupted
FRAN KELLY: I was going to say, if you look at that half-yearly update you will also see there is $9 billion ducked away there, slated, we imagine, for it is called decisions but not yet announced. Will every one of those dollars be spent and more on tax cuts and on I mean we read today in the Australian a billion dollars for beefing up freight networks and roads in regional Australia. I mean there is a lot of money being thrown around.
MATHIAS CORMANN: Well Governments do not spend money on tax cuts. A tax cut is a decision by Government to leave Australians with more of their own money, money that they have earned. It is a decision by Government to take less money out of people’s pockets. It is not expenditure. You are right, we have a commitment as a Government to keep the tax burden on the economy below 23.9 per cent as a share of the economy, as a part of our commitment to ensure that our economy can continue to be strong and indeed stronger into the future, that employment growth can continue to be strong and stronger into the future, that the unemployment rate can continue to be brought down. We inherited a rising unemployment rate…interrupted
FRAN KELLY: So that is confirming there will be more tax cuts tomorrow night to keep within that?
MATHIAS CORMANN: We have been on the public record for some time now in saying that we imposed a 23.9 per cent tax cap as a share of GDP on ourselves. We have made the decisions in past Budgets and Budget updates to fulfil that commitment and what Australians will see is that we will continue to fill that commitment that we have made as a part of our commitment to keep the economy strong and to ensure that Australians have the best possible opportunity to get ahead.
FRAN KELLY: How do you think a lot of Australians are going to respond to this notion of a surplus? I am sure they will, the Government may get some applause for that, but people are feeling the pinch. Wages growth has been flat or just off the table for some years now, we have got falling house prices. What do you think it is going to take for people to pat you on the back for surplus when they are doing it so tough?
MATHIAS CORMANN: When we came into Government the economy was weakening, unemployment was rising and rising unemployment means that wages will be lower than they otherwise would be. Under our period in Government, over the last five and a half years, on the back of a stronger economy, stronger employment growth, a lower unemployment rate, wages growth has been stronger than it would have been if…interrupted
FRAN KELLY: Wages growth is not strong, Minister. You are not telling people listening that wages growth is strong are you?
MATHIAS CORMANN: What I have said just now, if you listen to me, wages growth has been stronger than it would have been if we had not reversed the rising unemployment rate that we inherited from the Labor Party. It stands to reason into the future, if we can continue to strengthen economic growth, if we can continue to strengthen employment growth, if we can continue to drive the unemployment rate down, wages growth will strengthen into the future. Under Labor’s…interrupted
FRAN KELLY: With respect Minister, the Reserve Bank Governor and others have been telling people that for at least more than a year now and it is still not happening. Admittedly, that is not the orthodoxy but it is not happening.
MATHIAS CORMANN: Let me finish my answer here. The alternative, Labor’s agenda of $200 billion in higher taxes, which would lead to less investment into the economy, lower growth, fewer jobs, higher unemployment, would lead to lower wages. An agenda pursued by Labor, which is anti-business, anti-aspirational, higher taxes, central planning and command, will weaken the economy and a weaker economy will lead to lower wages. Our agenda is an agenda of stronger growth, more jobs, lower unemployment and higher wages over time.
FRAN KELLY: You are listening to RN Breakfast, it is 18 to eight. Our guest is the Federal Finance Minister Mathias Cormann. Minister, the ratings agency Moody’s is worried about Australia’s debt position and has put the Government on notice not to splash the cash tomorrow. It is forecasting Government debt will rise to 43 per cent of GDP by mid-2020. As the Finance Minister, wouldn’t you prefer to see this $9 billion plus that we are talking about going towards reducing debt, especially with the headwinds that the economy is now facing?
MATHIAS CORMANN: We have inherited a rapidly deteriorating Budget position and have been able to turn that situation around. We are about to deliver a surplus and if you look at our half-yearly Budget update, it shows that from 2019-20 onwards that the Budget will remain in surplus all the way over the medium term. Which means that all the way over the medium term…interrupted
FRAN KELLY: We should be paying down debt.
MATHIAS CORMANN: We will be paying down debt and indeed the Prime Minister has previously announced that over the medium term in this Budget that our intention is to completely eliminate Government net debt and…interrupted
FRAN KELLY: So what is the timeline on that?
MATHIAS CORMANN: Well over the current medium term so that is over the period 2019-20 to 2029-30. Over the next decade under our plan as the Prime Minister has previously announced we are working to fully eliminate government net debt.
FRAN KELLY: All right. Minister, I’m about to speak with Mark Butler the Shadow Climate Change Minister, Labor’s spokesperson on energy and climate. Labor will not use Kyoto credits to reach its 45 per cent reduction target in emissions, big polluters will be penalised if they breach tougher emissions standards and there is a big push to clean up the transport sector including a 50 per cent target for electric cars by 2030. All the polls suggest people want more action on climate change. Is Labor about to outbid you here?
MATHIAS CORMANN: Well firstly, when we came into Government, Labor left behind a massive deficit when it came to the 2020 emissions reduction target of about 755 million tonnes of CO2. We turned that around to the point where we are now on track to exceed the Kyoto emissions target by 367 million tons of CO2. Labor talks a lot, but what they have put out in the papers today would harm the economy, would harm families, would cost jobs, would drive up unemployment. Labor would bring back a carbon tax. They would force people across Australia to pay tens of billions of dollars in higher taxes only for them to send that money overseas to buy international carbon permits…interrupted
FRAN KELLY: Minister, I cannot see a carbon tax in that policy…interrupted
MATHIAS CORMANN: Well I have just told you what it is. I have just told you what it is.
FRAN KELLY: …I see that they are adopting your safeguard mechanism, which is your policy.
MATHIAS CORMANN: You seem to be deliberately ignoring the fact that Labor has confirmed that they want to send money overseas to buy international carbon permits. That means that they will be imposing tens of billions of dollars in higher taxes on Australians that should remain either in Australians’ pockets so they can spend it here in Australia on things that they want to buy or should be available to Government to invest in essential services here in Australia. If they, if Labor wants to buy international carbon permits, as they have said they would, they will have to increase the tax burden on Australians by tens of billions of dollars more than they should and that clearly is going back to the carbon tax, the discredited carbon tax arrangements of past Labor governments.
FRAN KELLY: All right, we will put that to Mark Butler in a moment. Just finally, you are not up for re-election as a Senator at this election, your Senate has another three years to run. If the Coalition loses the election will you serve out your full term?
MATHIAS CORMANN: I am absolutely in it for the long haul.
FRAN KELLY: Mathias Cormann, thank you very much for joining us.
MATHIAS CORMANN: Always good to talk to you.