Senator the Hon. Mathias Cormann
Minister for Finance and the Public Service
Leader of the Government in the Senate
Senator for Western Australia
KIERAN GILBERT: Joining us now is the Finance Minister Mathias Cormann. Thanks very much for your time. As the Government has said and the Prime Minister has put out Instagram pictures and so on, back in black, but you are not really back in black are you just yet? It is still a forecast, it is a not a delivered surplus.
MATHIAS CORMANN: If you look at our performance in Government when it comes to budget forecasts and actual performance you will see that over the last three financial years, we have materially improved on what was forecast at Budget time. In 2016-17 by $4 billion and 2017-18 by $19.3 billion. In this most recent financial year, we also are also outperforming what was forecast at Budget time and if you look at our net operating balance in 2018-19, this financial year, our recurrent revenue is exceeding our recurrent expenditure by about $8.5 billion. So we are now paying our own way when it comes to our day to day living expenses. But you are right, the forecast for next year is for a $7.1 billion underlying cash balance surplus.
LAURA JAYES: And the deficit for this year is a smaller deficit as you point out, just $4 billion. Why couldn’t you make that happen for this financial year? Could you have reigned in spending to find that extra revenue in order to deliver that?
MATHIAS CORMANN: We have significantly reigned in spending. If you look at our track record since 2013-14, you can see that expenditure growth in real terms under our Government has been limited to 1.9 per cent. We inherited spending growth that was more than double that. The numbers are what they are for this year. They are substantially better than what was forecast at Budget time this time last year…interrupted
LAURA JAYES: Is there any one thing that dictated that you could not quite get there though?
MATHIAS CORMANN: A Budget is made up of a whole series of decisions, policy decisions as well as taking into account the impact on where the economy is at, where various other indicators are at, what is happening with demand for services and the like. The number this financial year is a $4.2 billion deficit, which is substantially less than what was forecast last year. But we are on track for a surplus next year and for surpluses all the way through the medium…interrupted
KIERAN GILBERT: It would have been better if you could say you are back in black now legitimately as opposed to just, you know, on paper.
MATHIAS CORMANN: It is legitimate. Again, if you look…interrupted
KIERAN GILBERT: Not yet.
MATHIAS CORMANN: That is because you remember the experience under the Swan Labor Budgets when invariably after every Budget the next update was a deterioration in the bottom line. Whereas under our Government, if you look at our performance against Budget forecasts, in the last three years, we have been performing better in terms of actual performance compared to…interrupted
KIERAN GILBERT: I remember Joe Hockey though as well, when he said that there would be surpluses and there were not.
MATHIAS CORMANN: Again, people are misleading there because the Labor Party when they dishonestly briefed that are referencing a 2012 Joe Hockey comment that was made when Wayne Swan had announced four years of surpluses. You would remember that there was massive deterioration subsequently and deficits as far as the eye can see. In the 11 weeks from Wayne Swan’s last Budget in May 2013 to the pre-election economic and fiscal outlook in August 2013, the Budget deteriorated by $33 billion. There was a $3 billion a week deterioration in the Budget bottom line. What we see now on the back on more prudent, more cautious, more realistic forecasting assumptions is that invariably the change is on the upside, rather than on the downside.
LAURA JAYES: Was it a choice between more generous tax cuts, which you have delivered or a surplus this year?
MATHIAS CORMANN: We have a commitment to keep the tax burden on the economy below 23.9 per cent and that is because we believe that is important to keep the economy strong, to keep employment growth strong, to ensure we can continue to drive the unemployment rate down, which is an important ingredient in driving stronger wages growth. We have delivered stronger employment growth, which has helped boost revenue from personal income tax without increasing the tax burden on individual workers. By having more people in work, you collect more personal income tax revenue and also you have to pay less on welfare payments, because fewer people are on welfare... interrupted
KIERAN GILBERT: Why did you increase the tax cut or double the tax cut for everyone over $40,000, but under $40,000, there are about two million workers, they missed out, they just get the same as last year.
MATHIAS CORMANN: We are doing what we can and we are providing cost of living pressure relief for low and middle-income earners. We are also continuing the path of addressing bracket creep and reforming the tax system by reducing the 32.5 per cent marginal tax rate down to 30 per cent. This is part of an overall plan which is designed to help Australians with cost of living pressures, but also to provide the right incentive and encouragement for…interrupted
KIERAN GILBERT: But it is not as fair for people under $40,000 is it? If you are earning $50,000, you get a $1000, under $40,000 you do not get anywhere near that.
MATHIAS CORMANN: If you earn more, you will pay more in tax in nominal terms. If you look at things in nominal terms, if you pay more in tax at the same level of percentage, that is going to be a more beneficial income tax relief for you. The less you earn and the less tax you pay then the less, in nominal terms, the value of your income tax relief will be. That stands to reason.
LAURA JAYES: You have taken Labor’s tax cut plan from last year and raised them. Is this vindication for the plan that they put forward?
MATHIAS CORMANN: That is just wrong. Labor essentially looked at our income tax relief plan last year and decided to scrap $70 billion worth of income tax relief. They essentially decided to increase the tax burden on hardworking families by $70 billion. They made a few other adjustments, but we have now, in the context of having got ourselves on the back of hard work and a stronger Budget position, we have been able to build on our income tax relief plan from last year and take that further.
KIERAN GILBERT: Why don’t you legislate it if you believe so strongly in it? Why not move to legislate it, get it done?
MATHIAS CORMANN: It is very simple. We have experience in the Senate with comprehensive tax reform. We know that if we try to do this over the next 24 hours it would involve a lot of haggling with the Senate and we could not be confident that the Senate would do the right thing in terms of our income tax relief package. We believe the best way forward…interrupted
KIERAN GILBERT: You didn’t want to look chaotic before an election campaign?
MATHIAS CORMANN: No, we want to say to the Australian people, this is our plan. We have delivered lower taxes before. We will deliver lower taxes again if we are re-elected. It is your choice. Who do you trust to legislate income tax relief on the other side of the election? Give us a mandate and if we have a mandate, the Parliament, we are confident, will back us in after the election.
LAURA JAYES: You say you have got a plan in here to alleviate the problems that come with bracket creep. Is bracket creep still a big problem when your own figures show that wages growth is now being revised down again?
MATHIAS CORMANN: But wages continue to grow and wages continue to grow in a low inflation environment and we expect wages growth to pick up. That is all the best available advice. If you have inflation, then clearly people will continue to move into higher income tax brackets if there is no adjustment to take that into account. We also, beyond bracket creep, we want to ensure that Australians have the best possible incentive to continue to get ahead, to work hard because that is good for the economy overall.
KIERAN GILBERT: Do you feel it is an election winning Budget?
MATHIAS CORMANN: This is a Budget for a stronger Australia. This is a Budget that continues our plan to deliver a stronger economy, with more jobs and better opportunities for all Australians to get ahead.
LAURA JAYES: A few quick things, preschools get $453 million, that is certainty, but only for one year, why?
MATHIAS CORMANN: We have provided additional funding to preschools in every year that we have been in Government. But this is traditionally an area of state responsibility and there are some items of work that are still to be finalised. We would like to get to a longer-term arrangement, but that will involve further work with the states and territories before that can be finalised.
LAURA JAYES: I also could not find in the Budget any money set aside for the Collinsville feasibility study for a new coal-fired power plant that was promised to the Nationals. Is that in there?
MATHIAS CORMANN: Again, these are things that are done as business as usual in the context of the work that is done by relevant Ministers. The announcement has been made, we have had this program in relation to new additional energy generation and underwriting new generation and that process is taking its course. You would not expect there to be a specific measure in relation to that specific decision…interrupted
LAURA JAYES: Well there is for Marinus feasibility study though.
MATHIAS CORMANN: It will be done as business as usual as announced by the Government.
LAURA JAYES: Just one quick thing, sorry, GST tax receipts were significantly down, I think by about $7 billion. Is that concerning and why was that?
MATHIAS CORMANN: That is a function on how many products and services are purchased across Australia compared to what was assumed. If GST revenue is down, that is a function of activity being less than assumed over that period.
KIERAN GILBERT: Minister, we appreciate your time.
MATHIAS CORMANN: Always good to talk to you.