Senator the Hon. Mathias Cormann
Minister for Finance
Special Minister of State
Leader of the Government in the Senate
Senator for Western Australia
Date: Friday, 25 October 2019
ANNELISE NIELSEN: For more on this and other stories of the day, we are joined by Finance Minister Mathias Cormann, live from Perth Western Australia where it is very early. So again thank you for your time this morning.
MATHIAS CORMANN: Good to be here.
ANNELISE NIELSEN: Can the Government afford to be giving drought stricken farmers any kind of relief on income tax?
MATHIAS CORMANN: Without going into any specific measures, there is always pre-Budget speculation and now apparently we also have pre-half yearly Budget update speculation. Without going into any specific measures we are focused on providing additional support. As the drought continues and the impact of the drought continues to worsen our policy response to it will continue to evolve and strengthen. It is a matter of public record that we are assessing further measures. We have already done a lot. We are focused on supporting families, communities and on measures to build better drought resilience into the future. We will continue to assess further measures as appropriate. We are working with the NFF. We are reviewing all of the advice from all of the various quarters, all of the suggestions and we will make judgements as we always do.
ANNELISE NIELSEN: When it comes to that mid-year budget update will we be seeing any kind of drought relief in that? Or are we going to be seeing any announcements before that?
MATHIAS CORMANN: In the half yearly Budget update is where all of the fiscal updates and economic updates are provided. Any decisions that may be announced between now and then will be reconciled in terms of budget numbers in that document. We have two major budget documents every year. The Budget on 2 April this year and the half-yearly Budget update in the middle of December. Policy decisions in the intervening period get reflected in that document. As judgements are made and as additional support is provided through the decisions that we have made, they can be announced at any point, as has always been the case.
ANNELISE NIELSEN: So is the Government going to consider income tax cuts for farmers who are struggling in drought areas?
MATHIAS CORMANN: I have seen that speculation. I am used to pre-Budget and now also pre-half yearly Budget update speculation. I am not going to comment on individual options that the Government may or may not be considering. What we are doing is we are working with all relevant stakeholders. We are assessing a lot of information, a lot of advice on possible options. Through the proper process of the Expenditure Review Committee we will make judgements on what is the best way, in all of the circumstances, to provide further support to families, communities and to build further drought resilience for the future.
ANNELISE NIELSEN: So you are considering further drought funding?
MATHIAS CORMANN: That is a matter of public record. As the drought continues to go from worse to worse across significant parts of Australia and the impact continues to get worse, we will continue to consider what additional support measures we can put in place. That is what we are doing. That is a matter of public record.
ANNELISE NIELSEN: Now when it comes to the push for the stimulus for the economy, you received quite a bit of backlash this week when you said Labor stimulus response to the GFC pushed up interest rates, when in that time the analysis said it dropped from 7.25 per cent to three per cent. Do you still stand by that?
MATHIAS CORMANN: Firstly I did not receive quite a lot of push back. I got pushback from people who supported the Labor agenda and that analysis is wrong. If you look at what happened in the period from September 2009, over the subsequent twelve to fourteen months, uniquely around the world, the official cash rate went from three per cent to 4.75 per cent. That was at a time when the official cash rate in the US, the UK, across Europe, was hovering at around zero per cent and many countries around the world were pursuing quantitative easing. In Australia, not only did we have a comparatively very high official cash rate, we had high terms of trade. All of these factors combined meant that the value of our currency was significantly higher than it usually is, or than it has been in more recent times. That had a significant impact on the international competitiveness of all of the non-iron ore, coal, LNG parts of the economy. Making them less competitive in terms of Australian exports around the world. That did have a lasting impact in terms of our economy at the time. It had a lasting impact on the Budget. You had at the same time as Kevin Rudd was pushing billions and billions dollars out for pink batts and over priced school halls, you name it, sending cheques to dead people. At the same time that was happening with the government putting the foot on the fiscal accelerator, the Reserve Bank was putting its foot on the brakes, increasing the official cash rate in twelve to fourteen months by 1.75 per cent from three to 4.75 per cent. That is a matter of public record. Anyone who denies that just denies facts.
ANNELISE NIELSEN: Right now our interest rates are at 0.75 per cent. Is that a good thing?
MATHIAS CORMANN: Monetary policy settings are a matter for the Reserve Bank. The Reserve Bank makes these judgements independently. That is a very important feature of our architecture. It is a matter for the Reserve Bank to assess the information and make judgements. We absolutely respect that independence. In an international context if you look at … interrupted
ANNELISE NIELSEN: But when we have a tightening of fiscal policy, which is the lever you can control, does it give them any option but to push monetary policy?
MATHIAS CORMANN: I completely disagree with that proposition. We have delivered a pro-growth Budget. We are implementing a pro-growth Budget. We have legislated more than $300 billion in income tax relief over the last two years. More than $20 billion worth of income tax relief has gone back into peoples’ pockets over the last three or so months. We are rolling out a massive $100 billion infrastructure investment plan from the federal funding point of view. People are suggesting that we should do more faster. We are prepared to do more faster in those areas where that make sense. But we will never do what Kevin Rudd did. That is throw money at overpriced school halls that many schools did not need or putting more than a billion dollars into pink batts into peoples’ roofs which set houses on fire to the point where they had to spend another billion dollars to take those pink batts out of those roofs again. That might have stimulated the economy, but that is just a crazy waste of money. A crazy waste of money. If you want to invest in genuinely productivity-enhancing, economy-enhancing infrastructure, you do actually need to make sure that the projects are properly identified, properly prioritised and properly executed. That means that you cannot do it from one day to the next in many circumstances, in many instances.
ANNELISE NIELSEN: Now, the Nationals have complained that you are getting too cosy with Pauline Hanson, spending too much time wooing the crossbench Senator. We know that this has been, in particular, an issue with the dairy industry code of conduct going to Pauline Hanson’s credit instead of the Nationals. Are you too cosy with Pauline Hanson?
MATHIAS CORMANN: No. I was a bit surprised by those comments. When it comes to the broader issue of the dairy industry, I had a meeting with Pauline Hanson early in the sitting week where she asked for the reregulation of the dairy industry, something I disagreed with, the Government disagreed with and the dairy farmers disagree with. Later in the week, I became aware that there appeared to be some delays in the rollout of our pre-election commitment, the Nationals’ initiated pre-election commitment, to deliver a dairy code of conduct. There were delays that were driven by administrative bottlenecks. I helped Bridget McKenzie resolve those administrative bottlenecks. That was the beginning and the end of my involvement. There was actually no deal in relation to this with Senator Hanson. All we are doing is implementing our agenda more quickly. In fact, we did not agree to support what Pauline Hanson was asking for, though the Labor Party apparently is now in favour of the reregulation of the dairy industry. I was a bit surprised by those comments. In a broader sense, in the Senate, we have to work with crossbench Senators to get our agenda through. If we refuse to work with crossbench Senators like Centre Alliance, One Nation and Senator Lambie, we would effectively give Labor and the Greens a veto over our agenda. That would mean every time that Labor and the Greens disagree with something that we think is important for Australia, we would not be able to get it through the Senate. I think that my job is, among other things, to ensure that where we believe that something is important for Australia that we can get it through the Senate. Or where Labor and the Greens want to do something that would be bad for Australia that we can stop it in the Senate. From that point of view, I have professional relationships with leaders and Senators across the board. I have a very good relationship, I would say, with Senator Wong and Senator Di Natale. I have professional relationships with everyone in the Chamber in order to keep working things through.
ANNELISE NIELSEN: Why do you think the Nats are so unhappy at the moment?
MATHIAS CORMANN: I do not necessarily agree with that characterisation. It is not for me to comment on the internal affairs of other parties. But right now our friends in the Nationals are very focused on ensuring that there is better, stronger support for rural communities in the context of a terrible drought. In that sort of context, there is a lot of passion and there is a lot of focus. I think that there is nothing wrong with passion and determination and focus in politics. That is just part of the normal process of making sure that ultimately we land on the best possible way forward.
ANNELISE NIELSEN: Mathias Cormann, thank you for your time.
MATHIAS CORMANN: Always good to talk to you.