Senator the Hon. Mathias Cormann
Minister for Finance
Special Minister of State
Leader of the Government in the Senate
Senator for Western Australia
Date: Monday, 16 December 2019
PETA CREDLIN: As we just talked about then, the mid-year economic and fiscal outlook was released today. The Government remains on track to deliver a budget surplus this financial year, the first time we would have seen a surplus at a federal level, despite Labor’s many promises, in 12 years. But even with their own appalling fiscal record, Labor was quick to respond to the downgrade of the Coalition’s surplus, declaring the mid-year Budget update as a humiliating admission that the economy has deteriorated under the Government’s watch.
The Minister for Finance Mathias Cormann joins me. I know you’ve got a hectic schedule the mid-year Budget update is out today. Six years ago and I remember it well because I was there with you at the time, you inherited a Budget that was a mess of unfunded promises, spending out of control, debt was high, it had gone from the Howard years with no net debt to a position that was untenable. Today, yet again, you’ve confirmed that the Morrison Government has been able to get the Budget back into surplus. That should be good news, but much of the focus of the commentators and others has been that the surplus forecast has been, in part, reduced. In cumulative terms, you still have that surplus over the next four years, but it’s basically been cut in half. What’s the reason for this and is this a worrying sign that our economy is getting more fragile over time?
MATHIAS CORMANN: No. Our economy continues to grow. Employment growth continues to perform strongly. In fact employment growth in Australia is running at more than twice the rate across the OECD. Indeed, our Budget remains in surplus despite significant revenue write downs on the back of, principally, a softening in economic conditions on the back of lower global growth. When we came into government in 2013, we inherited a weakening economy, rising unemployment and a rapidly deteriorating budget positon. Since 2013 we have implemented more than $200 billion worth of budget repair measures over the period to 2022-23, many of them structural savings measures which continue to build over time, putting us on a stronger trajectory for the future. The reason we are able to sustain a revenue write down of more than $30 billion and still remain in surplus this year, every year over the forward estimates and indeed over the medium term with surpluses building to more than one per cent of the GDP, is because of our very careful and considered economic and fiscal management.
PETA CREDLIN: I did listen with interest. Jim Chalmers, he’s the Shadow Treasurer for the Labor Party, today criticised your MYEFO update. He called it a humiliating admission that there had been a flat lining in some of the numbers, that there had been a reduction in the surplus. I did think that it was pretty low of Labor to go there because Jim Chalmers was the chief of staff to Wayne Swan, who promised four surpluses that never eventuated, so to criticise the fact that you got a surplus I thought was a bit weird. What’s been your response to Labor’s criticism?
MATHIAS CORMANN: Even more recently, Jim Chalmers was part of the economic team in the lead up to the last election promising to deliver $387 billion of higher taxes which was comprehensively rejected by the Australian people. These higher taxes would have made our economy weaker, would have made employment growth weaker, would have led to high unemployment and lower wages. No question. What we continue to do is to carefully and steadily implement our plan, make adjustments in a considered fashion. There has been a level of hyperventilating going on from our political opponents. Quite frankly, it doesn’t really matter. They are jumping up and down. In the end we just continue to make considered judgements about putting Australia on the strongest possible economic and fiscal foundation and trajectory for the future. By any measure, given what has been going on around the world in 2019, Australia continues to perform comparatively well. Trade tensions between the US and China, the uncertainty around Brexit at least until Thursday of last week, a whole range of other geopolitical hotspots around the world, all of that has weighed on global growth, which has had flow-on consequences on economic growth in Australia. On top of that, we have had the floods earlier this year. We have had a significant ongoing drought, the bushfires, a whole range of things that have had an impact on domestic growth. Yet where other economies around the world, like Germany, the UK, South Korea, Singapore and others, have had negative quarters of growth, were shrinking, our economy continues to grow and growth in 2019 has actually been stronger, growth in each quarter in 2019, has been stronger than in the last two quarters of 2018. A lot of noise from the Labor Party, but not a lot of fact-based scrutiny.
PETA CREDLIN: Let’s just talk about net debt. I had a look at the data in your numbers today. It says net debt is set to hit $392 billion this financial year, or 19.5 per cent of GDP. Your numbers say that will fall, that you will get it down to 16 per cent of GDP by 2022-23. How are you going to get this done given the reality of most of your legislative packages, the reality is they often need crossbench support and crossbench support usually means signing a cheque. You’re the lead negotiator for the Senate, for the Government in the Senate, is debt reduction still a priority?
MATHIAS CORMANN: Yes it is. The way to pay down debt is by delivering surplus budgets. I would say again, since the 2016 election we have implemented, not just proposed but implemented, a further $70 billion worth of budget repair measures, about $200 billion in budget repair measures implemented since the 2013 election and that impact flows through. There is actually only a very small number of budget measures that still remain to be legislated, about $4.9 billion worth that still remain to be legislated. We expect that to be dealt with through the Parliament in the not too distant future. There has been a one off adjustment in the level of net debt in this half-yearly Budget update as a result of a change in accounting treatment, which has lifted net debt as a share of the economy from 18.6 per cent to 19.5 per cent. Over the medium term to 2029-30, net debt is projected to reduce down to 1.8 per cent. With surpluses being somewhat smaller than previously forecast it will take us a little bit longer to get there. At budget time, we were projecting the elimination of net debt by 2029-30, so we are now projecting to reach 1.8 per cent net debt as a share of GDP at that time.
PETA CREDLIN: Let’s talk wages. In your press conference today you made this comment. You said that disposable incomes are growing at their fastest rate in more than 10 years. Explain that a little more to me. How do we get people if they’ve got disposable incomes that are growing, how do we get them to spend, particularly going into this do-or-die Christmas retail season?
MATHIAS CORMANN: The National Accounts data for the September quarter clearly showed that 2.5 per cent growth in disposable income in the September quarter. That is the highest growth rate in disposable income in more than a decade. A significant factor in that are the personal income tax cuts which we legislated and which came into effect from 1 July. In the end what matters to people around Australia is how much of their own money ultimately ends up in their pocket. In terms of how people choose to use that money, that is really a matter for them because deciding to allocate more to pay off the mortgage faster or to save more puts people in a stronger financial position for the future too, which helps to strengthen our economy moving forward. Individual Australians can make the decisions whether they want to spend more by way of consumption or whether they want to put more money aside for future expenditure. That is entirely a matter for them.
PETA CREDLIN: A few years back there was a big commission of audit when the Government came into office and it was a deep dive across the expenditure of government. What’s the priority of government, the size of government, the number of public servants, various programs, whether they were effective in meeting the commitments, things that it probably even run on without being revisited and some of them could go and save money. Out of that review came a lot of work about lowering regulation, having government only as big as it necessarily needs to be and no bigger which meant reducing public servants, particular quangos. There these bodies that get set up to administer something and they live on and on and on, long after the job that they were set up to do had been done, costing a lot of money. That was a priority of the Abbott Government. It fell away under Malcolm Turnbull. Is that back on the agenda because I know Ben Morton has spoken a lot about regulation and it’s critical in terms of budget repair?
MATHIAS CORMANN: We are very focused on our deregulation agenda which is all about making it easier to do business in Australia, reducing the cost of doing business. We have been focused under the Abbott Government and since then on reducing the size of government and getting rid of unnecessary boards and committees and all of these smaller organisations that can perform better as part of a broader departmental arrangement. That is something that we have been doing all the way through quite successfully I would like to think. The number of public servants in Australia at a federal level remains down at the same level as 2006-07. We reduced it initially as you might recall, principally through natural attrition. We reduced it back to the 2006-07 level and we have maintained that at the 2006-07 level all the way through the initial six years of government. Considering population growth since that time, that is a real reduction in the proportionate size of the public service over that time. Across the board, we did inherit a lot of government bodies, too many government bodies. We continue to work to ensure that government administration is as efficient and as effective as possible. The Prime Minister made some announcements in relation to that a few weeks back when he announced a reduction in the number of federal government departments.
PETA CREDLIN: And I commended him at the time at the reorganisation. I think it was 18 departments beings brought down into 14. I thought they were very sensible changes. In and around that there was the Thodey Review. Some recommendations have come out in the media today. One of the recommendations put up by Thodey in that review and knocked back by the Government is that there should be a formal ministerial code of conduct. The Government says it’s not needed. I’ve been a ministerial staffer for a long time, I don’t know that that’s true. Why do you think it shouldn’t go ahead?
MATHIAS CORMANN: In the end, Ministers are accountable to the public… interrupted
PETA CREDLIN: This is about their staff. It’s about a staff code of conduct.
MATHIAS CORMANN: A ministerial staff code of conduct? Ministers are accountable and Ministers are also accountable for the performance of their offices. We have the Ministerial Statement of Standards and there are all sorts of rules and regulations that guide the conduct of Ministers and their staff. We believe the current arrangements work very well.
PETA CREDLIN: The Ministerial one, put the Ministers to one side, the one for staff is just a good will document and you could drive a truck through it. Why on earth isn’t there a formal ministerial staff code of conduct?
MATHIAS CORMANN: We believe that the current arrangements work very well.
PETA CREDLIN: Alright. I’ll leave that there. What about Boris Johnson’s big win on the weekend? What did you make of it? The ramifications, we analysed it, I think everyone has over the weekend because the scale of the victory was there and will obviously mean a real Brexit and trade implications for Australia. But also, I think the message it sends to Labor and hard left policies that we see with the Labor Party here in Australia and the Labour Party in Britain, what did you take out of the last few days?
MATHIAS CORMANN: It was a magnificent win. It was clearly a stark choice in Britain across a range of levels. It was yet again a clear rejection of a socialist agenda which aspirational people all around the world understand would make them poorer and their countries weaker. So that is a good thing. It was also very much a further referendum if you like in relation to the way forward on Brexit. I think that whether people were pro-Brexit or pro-remain three years ago, after three years of going around and around in circles, I think people received Boris Johnson’s determination to resolve this and get Brexit done as a breath of fresh air. I think there is a global sigh of relief that there is now certainly around the way forward. It certainly is good for Australia. We are very keen to get a trade agreement finalised with the United Kingdom as swiftly as possible. The Prime Minister and Boris Johnson had a conversation on Saturday night to that effect. We are certainly very keen to get that done in record time. I believe that for Britain, for the European Union and for trading nations around the world, having the Brexit issue now resolved with the level of certainty that the British election has resolved it with is a very good thing.
PETA CREDLIN: There you go.