Senator the Hon. Mathias Cormann
Minister for Finance and the Public Service
Leader of the Government in the Senate
Senator for Western Australia
AMANDA DRURY: The Budget is also tabling a $158 billion Australian dollars in tax cuts, aimed at the middle income earners over the next decade. Will Koulouris spoke with our Finance Minister Mathias Cormann and asked him if this spending plan would serve as an election boost.
MATHIAS CORMANN: This is a Budget that will continue to ensure that the Australian economy will be as strong as possible, that employment growth will be as strong as possible, that wages growth will strengthen into the future. We have funded all of the essential services Australians rely on, on a sustainable basis without increasing taxes. In fact, while delivering income tax relief for hard-working Australians.
WILL KOULOURIS: Was this always the plan though? Would the tax cuts have been this significant if it was not an election year?
MATHIAS CORMANN: We delivered and legislated $144 billion worth of income tax relief last year. This is a continuation of our long-term plan to provide the right incentive and reward for effort to hard-working Australians, but also to help low and middle-income earners with cost of living pressures and to reform the tax system to facilitate stronger growth into the future.
WILL KOULOURIS: Now the Shadow Treasurer Chris Bowen was doing the rounds last night. He was saying that the surplus forecasts that came through in this year’s Budget are really predicated on wages growth eventually rising to 3.5 per cent. He is implying that that is more of an assumption than achievable. What do you make of that considering that the tax income is half your revenue?
MATHIAS CORMANN: The Australian people know that under Labor the Budget outcomes invariably were worse than what was forecast, whereas our track record is one where our Budget performance against estimates invariably is better than forecast. If you look at our track record, in the most recent three financial years, in 2016-17 the final bottom line was $4 billion dollars better than forecast, in 2017-18 it was $19.3 billion better than forecast and in 2018-19 we are also significantly running better than forecast back at Budget time last year.
WILL KOULOURIS: Now he was also be saying that this Budget does not do enough for those under $40,000 a year. What do you make of that?
MATHIAS CORMANN: We are providing significant income tax relief, prioritising low and middle income earners in the first instance, but the less you earn the less tax you pay in nominal terms, which means that if you reduce the tax burden, as you are higher up the income scale at the lower and middle income end, the value of the tax cuts will be more significant for you.
WILL KOULOURIS: Has this Budget really signalled the end of any kind of push towards lowering the tax rates at the corporate end of the scale or?
MATHIAS CORMANN: We have reduced the tax rate for corporates. We have reduced the corporate tax rate to 25 per cent for businesses with a turnover of up to $50 million and we have also in this Budget further expanded the instant asset write-offs by lifting the amount that can be claimed per investment to $30,000 and also expanding the eligibility to businesses with a turnover of up to $50 million. This is what we can afford in the context of this Budget and in the context of current economic settings.
WILL KOULOURIS: But for larger business though, we have a considerably higher tax rate than that of our peers. Is there any move to lower that rate should you be re-elected?
MATHIAS CORMANN: That is not our plan reflected in the Budget. It is something we tried to do last year. That was unsuccessful through the Parliament and we have accepted that. We were not able to get that through the Parliament.
WILL KOULOURIS: Now you have got $100 billion of infrastructure spending over the next ten years, it is a significant increase. But there are people that are saying you know, it is mainly in terms of marginal seats, it is a play on votes. What would you say to people that are making that assessment? I spoke to Chris Richardson actually yesterday and he was saying that, you know, it is great to have the infrastructure spend but it is not exactly being directed towards the best places.
MATHIAS CORMANN: We completely reject that. We have a very robust process of identifying the priority infrastructure projects that Australia needs to continue to grow our economy. We are focused on both congestion-busting, as well as productivity-enhancing, economy-growing infrastructure and for any infrastructure project above a certain value, there is a very rigorous process of proper prioritisation based on economic need and not based on political discretion.
WILL KOULOURIS: The Budget has done considerably well considering the strength of the commodity prices. In the modelling for example, thermal coal is expected to remain at say $91 dollars US per tonne. Now with the ongoing issues in China, there is those restrictions, your Government holds the position that there is not any kind of major issue there. Some are saying however that China is kind of making a play towards punishing Australia in a sense. Are you worried that, if this continues, the Department of Industry said in this report that that is the biggest key risk to the coal industry this year, those Chinese restrictions. Are you worried that this is going to impact the Budget negatively for this year?
MATHIAS CORMANN: The Budget numbers reflect what we believe is most likely to happen. So the forecasting assumptions are cautious, they are responsible, they are realistic and they are based on the best available advice that we have in front of us about what is the most likely development into the years ahead.