Senator the Hon. Mathias Cormann
Minister for Finance and the Public Service
Leader of the Government in the Senate
Senator for Western Australia
ELYSSE MORGAN: While this is the first for Treasurer Josh Frydenberg, it is the sixth for veteran Finance Minister Mathias Cormann and I caught up with him in the lockup.
Mathias Cormann there is not yet a surplus. Are you confident that there will be one next year?
MATHIAS CORMANN: Yes. We are forecasting a $7.1 billion surplus next year and if you look at our performance in recent Budgets, our Final Budget Outcomes, over the last two financial years materially outperformed Budget forecasts, in 2016-17 by four billion dollars and in 2017/18 by $19.3 billion. That is because our revenue assumptions are based on very conservative assumptions, our revenue forecasts are based on conservative assumptions and we have kept expenditure growth under control
ELYSSE MORGAN: Where is the buffer though, in this Budget, that we have seen you are projecting a $45 billion surplus over the next four years, but a lot of that is really committed to infrastructure spending, like the NBN etc. So actually, if you look at the real cash surplus at the end of the four years it is closer to six billion?
MATHIAS CORMANN: No that is not right. The $45 billion is the surplus after all of the expenditure and taking the expected revenue into account …interrupted
ELYSSE MORGAN: That is the underlying, the $45 billion is the underlying…interrupted
MATHIAS CORMANN: It is the underlying cash balance, it is not the net operating surplus. The net operating surplus is recurrent revenue minus recurrent expenditure, which is already in surplus this financial year, the 2018-19 financial year. The underlying cash balance takes into account infrastructure investment. It is not like the net operating surplus. The fundamental point is that we have been on this trajectory for some time now. We have been able to control expenditure growth. Expenditure growth since 2013-14 all the way to the end of this current forward estimates period has been kept below two per cent
ELYSSE MORGAN: The surplus that you are projecting, around a fifth of it comes from inefficiency from the NDIS rollout. How should disabled people feel about that?
MATHIAS CORMANN: Well that is not right. We do make assumptions about what the expected level of utilisation is going to be over the next four years based on the rollout of the NDIS so far. This is a very fundamental and very important reform. We are moving essentially from a state-based, block funding of providers model, where a lot of people with a disability were not getting the support they needed, to a fully-funded national demand-driven program and…interrupted
ELYSSE MORGAN: But that is really just saying that there is inefficiency in the rollout, isn’t there?
MATHIAS CORMANN: No.
ELYSSE MORGAN: If you have said that you are going to spend $1.6 billion and you have not.
MATHIAS CORMANN: No that is just not right. Across the whole of the Budget, you always try to make the best possible assumption on what the likely expenditure is going to be in any one year. That is an estimate. You make an estimate based on the best available information.
ELYSSE MORGAN: On the surplus, you are relying on also being able to count the Future Fund to continue to grow your surpluses. Without that, your surpluses look a lot weaker, don’t they?
MATHIAS CORMANN: Well the Future Fund earnings, consistent with the usual methodology, are earnings for government. I mean…interrupted
ELYSSE MORGAN: But they keep, you haven’t been able to count them in the past and from 2020-21 onwards you will be able to. I am just asking. Without it, without it the surpluses are much smaller aren’t they?
MATHIAS CORMANN: This is consistent methodology. It is a methodology that was envisaged by governments of both political persuasions right since the inception of the Future Fund. Government gets revenue from a range of sources, from taxes, from fees and charges and from earnings on its investments and that is…interrupted
ELYSSE MORGAN: But what I am trying to get at is the surpluses that you are projecting are actually really smaller than, there is less buffer in there than what we are anticipating. So you have got the 2020-21 year, an $11 billion surplus, but if you strip out the Future Fund, which previously has not been allowed to be counted, it is closer to five and then…interrupted
MATHIAS CORMANN: So what you are saying is that if we get less revenue, we will have a lower surplus. Well that is right, but we are not assuming less revenue, so that is…interrupted
ELYSSE MORGAN: But you have not been able to count the Future Fund before.
MATHIAS CORMANN: That is not right.
ELYSSE MORGAN: What I am trying to get to is…interrupted
MATHIAS CORMANN: That is actually factually incorrect.
ELYSSE MORGAN: If you get out to the end of the forward estimates…interrupted
MATHIAS CORMANN: Your assertion is factually incorrect.
ELYSSE MORGAN: Okay. If you get out to the end of the forward estimates, the surplus after hitting 17 comes back to nine. Are you projecting that things will be getting tougher in the economy around that time?
MATHIAS CORMANN: We are projecting strengthening growth. We are projecting stronger employment growth. We are projecting surpluses all the way over the forward estimates and over the medium term, based on revenues as reflected in the Budget papers and that includes revenue from Future Fund earnings that are reflected consistent with the requirement in the Charter of Budget Honesty in the appropriate fashion.
ELYSSE MORGAN: Taking a look at the tax relief and the increase in the Instant Tax Write-Off for small business. This will obviously be welcomed by the business community. What effect do you think that this will have on wages and on activity?
MATHIAS CORMANN: This is part of our plan for a stronger economy. We want to encourage small and medium-sized businesses to invest more, so that they can grow more and businesses that grow more will hire more Australians and as businesses across Australia hire more Australians, the unemployment rate will continue to go down. The excess supply in the labour market will continue to go down. Competition for workers will increase and wages growth will strengthen and that is a key part of our plan for a stronger economy and for stronger wages growth.
ELYSSE MORGAN: And there is only around $20 a week in handouts for households in this Budget. Is that enough to be election winning?
MATHIAS CORMANN: Well we make judgements based on what is fiscally responsible and what is economically sensible and that is reflected in the Budget.
ELYSSE MORGAN: Mathias Cormann, thank you so much for your time.
MATHIAS CORMANN: Always good to talk to you.