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, 15 November 2019
TOM CONNELL: It’s time for our first interview of the day. Joining me is the Finance Minister Mathias Cormann. Mathias Cormann thanks very much for your time this morning. Let’s start on the economy. This week we have had the wage price index, 0.5 per cent for the quarter. A disappointing figure. The economy shrinking as well by 20,000 jobs in October. How would you sum up the performance of the economy right now?
MATHIAS CORMANN: Real wages growth is actually running right on the twenty year average. Wages continue to grow faster than inflation, about 0.6 per cent above inflation, which is consistent with the twenty year average. If you look at the performance of the economy over the last six years, about 1.5 million new jobs have been created. I do not believe that you can jump to conclusions in relation to one month’s data. We will be looking forward to the third quarter national accounts data to finalise our judgements in the lead up to the half yearly Budget update.
TOM CONNELL: So what’s that going to mean exactly? What is on the table for MYEFO depending on that particular figure you mentioned there, the next accounts figure.
MATHIAS CORMANN: MYEFO is a half-yearly Budget update. It is not a Budget. In the half yearly Budget update we will be providing updated assessments in terms of the economic and fiscal outlook. That is what you would expect. There will be a range of areas where there will be increases in expenditure in relation to supporting communities impacted by the drought, investing in increased drought resilience as well as supporting families and communities impacted by the drought. There will be increased funding support in particular for the aged care sector. These are things that we have already publicly canvassed. Beyond that, it is an update. It will provide an update in terms of our assessment of the economic outlook, the revised economic outlook over the forward estimates.
TOM CONNELL: Is there any prospect of any form of stimulus being announced, whether that is going to start straight away or even after the next Budget?
MATHIAS CORMANN: We delivered a pro-growth Budget on 2 April. It is a plan that we took to the last election to build a stronger more resilient economy where more jobs are being created. That is the plan that we are implementing, that we are delivering on. That is what we promised to the Australian people we would do. That is what the Australian people expect us to do.
TOM CONNELL: It’s a pro-growth Budget, perhaps, but the growth is not showing up. So if that is confirmed in the next accounts update, would that give any rise to a possibility of more stimulus in MYEFO or not?
MATHIAS CORMANN: I completely reject what you have just said. The Australian economy continues to grow. The Australian economy continues to grow when a number of other economies around the world are shrinking. In the June quarter Germany, the UK, South Korea, Singapore all had negative quarters of growth and the Australian economy continued to grow, despite all of the global economic headwinds, despite the impact of global trade tensions on the global economic growth outlook. We have had several downgrades in the global economic growth outlook which has a direct impact on our domestic growth outlook here in Australia, because we are an open trading economy. Yet our economy continues to grow where other economies are shrinking. We have to continue to make sensible … interrupted
TOM CONNELL: Are you happy with the growth rate?
MATHIAS CORMANN: Sorry? What did you say?
TOM CONNELL: Are you happy with the current growth rate of the economy?
MATHIAS CORMANN: We are satisfied that the Australian economy continues to grow. We want to keep building a stronger more resilient economy, where Australians have the best possible opportunity to get ahead. That is what we are doing. That is why we have legislated lower income tax rates. That is why we are rolling out a $100 billion infrastructure investment program, designed to strengthen our economy into the future in a structural way by investing in productivity enhancing, economy enhancing infrastructure. That is why we are pursuing free trade agreements to give our exporting businesses better access to markets around the world. That is why we are working to lower energy prices. That is why we are investing in skills. We are continuing to implement our pro-growth agenda. We are not going to get distracted by hyperventilating commentary from a floundering shadow Treasurer.
TOM CONNELL: Okay, do you still think wage growth will increase to 3.25 per cent next year?
MATHIAS CORMANN: Again, we will be providing our updated forecasting assumptions and our updates in terms of our economic and fiscal outlook in the middle of December … interrupted
TOM CONNELL: But that particular figure seems heroic right now does it not?
MATHIAS CORMANN: I am not going to provide a running commentary. We provide the updates to our economic and fiscal outlook in an orderly fashion, at Budget time and at the time of the half yearly Budget update. It is no secret that we are facing global and domestic economic headwinds. In the domestic economy, we are dealing with a significant drought. Earlier in the year we had significant floods. Both of these things have had an impact on our domestic economy. All things considered, Australia is performing extremely well. If you look at the repeated statements of the Governor of the Reserve Bank who has pointed out that on the back of lower interest rates, lower tax rates, continued high investment in infrastructure, pick up in the resources sector, a competitively priced exchange rate, that he expects economic growth in Australia to gradually strengthen. That is certainly our expectation as all.
TOM CONNELL: Obviously the Government is still determined to deliver the surplus in the current financial year. I want to ask about the longer term picture because the Government’s other plan was to pay off all net debt over a decade. Do you have a similar determination for that, or are you a bit more malleable?
MATHIAS CORMANN: What the Budget forecasts and projections on 2 April showed is that based on the policy decisions of the Government and all of the economic parameters, the result was that at the end of the medium term, government net debt would be fully paid off. That was a projection based on the impact of decisions and economic parameters. We will be providing an update to our forecasts and projections in the half-yearly Budget update. It will show you what the impact of policy decisions and economic parameter variations since the Budget has been on those projections.
TOM CONNELL: But just in terms of your determination, your disciplines if you like, as I said, this current surplus is something the Government has guarded very jealously. Is there going to be the same determination rolling right out or are you more flexible about making sure the economy really gets flying again?
MATHIAS CORMANN: I will tell you what our determination is. Our determination is to build a stronger, more resilient economy where Australians today and into the future have the best possible opportunity to get ahead. Our determination is to ensure taxes are as low as possible, as high as necessary, but as low as possible and fiscally responsible, while we are funding all of the essential services Australians rely on and which Australians expect in a fiscally sustainable fashion while also making sure that the Government lives within its means. If we do not ensure that the Government lives within its means and delivers a surplus then we weaken the opportunity for Australians into the future, because we would be imposing either higher tax burdens or deeper spending cuts on Australians into the future. It is very, very important that we achieve all of these three competing objectives, taxes as low as possible and sensible, funding guaranteed for all of the essential services, while also making sure that Government lives within its means. That is a very significant component of building a stronger, more resilient economy into the future.
TOM CONNELL: Just a couple of quick topics to cover off. The Australian organic infant formula company Bellamy’s is going to be bought by a Chinese company, approved by the Treasurer after it got ticked off by the Foreign Investment Review Board. Do you think there should be a bit of a watch on this area given China’s interest, you know, a limit on how much they could buy up within the infant formula area?
MATHIAS CORMANN: Firstly, we welcome foreign investment. Australia relies on foreign investment to support our future growth and jobs creation. That investment will support jobs here in Australia. It went through the appropriate assessment through the Foreign Investment Review Board as you say. That concluded that the foreign investment proposal is not contrary to the national interest. The Treasurer has approved it with some conditions which include conditions in terms of residency and citizenship requirements for Board members in terms of making sure that the headquarters has to be in Australia for at least the next 10 years and various other conditions which are enforceable. On that basis, it is a welcomed foreign investment … interrupted
TOM CONNELL: It’s an important supply though, I guess is what I’m getting to, for this particular area.
MATHIAS CORMANN: It is an incredibly fantastic opportunity for Australians to sell more of that product not just here in Australia but into the Chinese market.
TOM CONNELL: Alright. Just finally, Ben Roberts-Smith had some advice today for anyone that would be thinking about joining the ADF. His advice would be don’t, and he says leadership, in particular top brass, is one of the big issues. What’s your response to that?
MATHIAS CORMANN: Providing the appropriate support to those fellow Australians who choose to serve is absolutely important and the Government continues to very carefully consider what more we can. We have done a lot in recent years in terms of providing additional and better support to our serving and former serving personnel. In terms of the point that he makes that we need to ensure that appropriate support is provided, I completely agree with him. We would like to continue to see Australians put their hand up and commit themselves to serving our nation. As a Government, as a nation, we have a responsibility to ensure that the appropriate supports are provided on the way through and after their service has concluded.
TOM CONNELL: It’s not a good advertisement though, is it?
MATHIAS CORMANN: I think I have provided you my answer.
TOM CONNELL: Okay, Finance Minister Mathias Cormann, thanks for your time.
MATHIAS CORMANN: Always good to talk to you.