Senator the Hon. Mathias Cormann
Minister for Finance
Special Minister of State
Leader of the Government in the Senate
Senator for Western Australia
Date: Tuesday, 17 December 2019
PETER STEFANOVIC: Joining me now is Finance Minister Mathias Cormann. Mathias, good morning to you. Thanks so much for joining us.
MATHIAS CORMANN: Good morning.
PETER STEFANOVIC: Back in April Josh Frydenberg said that the Budget is back in black and Australia is on track. Is that still the case?
MATHIAS CORMANN: The Australian economy continues to grow. Objectively if you consider the Australian economic performance in its international context, we continue to perform comparatively well. Employment growth in Australia is running at twice the rate across the OECD. It is nearly three times as high as it was when we came into Government. Our Budget remains on track to surplus each year over the forward estimates and all the way over the medium term, with the surplus projected to reach more than one per cent as a share of GDP over the next decade.
PETER STEFANOVIC: But debt has also doubled since you came into Government.
MATHIAS CORMANN: We inherited a rapidly deteriorating budget trajectory from Labor, with deficits as far as the eye could see. When you inherit a deficit trajectory of course debt will increase. You can only reduce debt when you get the Budget back into surplus. We are only getting back into surplus this financial year. So self-evidently, debt is much lower than it would have been if we had not made $200 billion worth of savings since the 2013 election, which continue to build.
PETER STEFANOVIC: You don’t have a lot of wiggle room though do you? We are talking about a $5 billion surplus over the next year and when you compare that to a $550 billion Budget it is a snip isn’t it?
MATHIAS CORMANN: It is 0.3 per cent as a share of GDP. We continue to make judgements to meet all of our objectives to build a stronger economy, create more jobs, ensure that we can guarantee funding for the essential services Australians rely on in a sustainable fashion and to ensure that Government lives within its means. What the half yearly Budget updated yesterday shows is that we remain on track.
PETER STEFANOVIC: We know that the Government likes to stay positive in these sorts of things but according to the figures yesterday there has been a downgrading in forecasts for not just the economy, but wages, inflation and consumption, all downgraded. Certainly doesn’t seem very pretty to me. So where do you see the positivity in that?
MATHIAS CORMANN: Again, two per cent employment growth over the last twelve months, which is more than twice the rate of employment growth across the OECD. Nearly three times as high as was left behind by Labor when they lost government. Wages continue to grow faster than inflation. Real wages growth at 0.6 per cent is consistent with the long term average. In the most recent quarter, at 2.5 per cent growth in disposable incomes, disposable incomes have grown at the fastest rate in more than a decade. More than five per cent increase in disposable income over the last twelve months. Of course, Australia is facing global economic headwinds. We are facing come clear and obvious challenges in the domestic economy with the impact of the ongoing drought in large parts of regional Australia and the floods earlier in the year. Of course we are dealing with issues. But again, countries like the UK, Germany, South Korea, Singapore and others have had negative quarters of growth. Their economies have been shrinking. The Australian economy continues to grow and growth in 2019, the three first quarters of 2019, was stronger than in the second half of 2018. Our outlook is quietly optimistic. Some of the international issues that have weighed down global economic growth, like the US-China trade tensions, like Brexit, the uncertainty around Brexit, are now heading in the right direction. There is certainty now around the way forward for Brexit and some of the developments between the US and China in terms of resolving their trade tensions have also been very encouraging.
PETER STEFANOVIC: You are right, they are heading in the right direction, but they are not completely there yet, especially when it comes to that US China trade war. Some of those problems that you also spoke about being the bushfires out there, the drought as well, there is not going to be any significant rainfall until April next year. So MYEFO referred to a $22 billion write down when it comes to the surplus. What makes you think that that might not be written down even further, bearing in mind that those problems could even get worse?
MATHIAS CORMANN: Because as we have done for quite a number of years now, our forecasting assumptions are appropriately prudent and conservative. If you look at our performance against Budget and Budget updates, when it comes to the Final Budget Outcome over the last three financial years, once we had stabilised the deteriorating trajectory we inherited from Labor, you will find that on each occasion our Final Budget Outcome was materially better than what was forecast at Budget or Budget update time. Look at our track record. Anyone who looks at our underlying assumptions in this Budget update can see that we have again been appropriately prudent and conservative.
PETER STEFANOVIC: What the economy is showing us at the moment Minister, is that the first tranche of tax cuts hasn’t worked, which stands to reason that the second …
MATHIAS CORMANN: I disagree with that.
PETER STEFANOVIC: It hasn’t worked because the economy is not growing.
MATHIAS CORMANN: I disagree with that.
PETER STEFANOVIC: How so?
MATHIAS CORMANN: Again, you have to look at the performance of the Australian economy in its international context. What you can’t see is what would have happened in Australia as it has in other parts of the world if we had not legislated $300 billion worth of income tax relief and if we had not ensured that more than $20 billion of people’s money was returned back to them by way of income tax relief. The economy in 2019 grew more strongly than in the second half of 2018. The economy in Australia is growing stronger than in many parts of the world. In many other parts of the world, the economy is shrinking. Some of the commentators need a bit of a reality check when it comes to where we are actually at.
PETER STEFANOVIC: What about more tax cuts for business? Do you see more incentives for business in the New Year?
MATHIAS CORMANN: We are always looking at ensuring that our policy settings make us internationally as competitive as possible, help us build a stronger, more prosperous economy where all Australians have the best possible opportunity to get ahead. Yesterday we released our half-yearly Budget update. The next Budget, the 2020-21 Budget will be delivered on the second Tuesday in May. I am not going to be in a position to do that for you today. We will continue to review the economic data, all of the information in front of us. We will make judgements on what is desirable and what is achievable given the fiscal environment that we are in.
PETER STEFANOVIC: So what options are you looking at? You said you might be looking at some options. Can you let us know what some of those options are?
MATHIAS CORMANN: Again, we will deliver our 2020-21 Budget on the second Tuesday in May. We will continue to review the economic data. We will continue to make judgements on what is desirable and what is achievable and these judgements, once finalised, will be announced in the appropriate way.
PETER STEFANOVIC: Minister, I know that this isn’t your portfolio, but there is a bit of stoush going on, according to The Australian anyway today when it comes to water and the Murray-Darling Basin Plan. Jim Chalmers just came from Canberra. He said that the Coalition has made a mess of water policy, that there’s no plan in place. Do you have a response to that, talking about how talks might collapse?
MATHIAS CORMANN: Jim Chalmers, whatever he comments on, he is known for his hysterical, hyperventilating commentary on anything and everything. So I would not take too much notice of what Jim Chalmers has to say. David Littleproud will continue to work with all of the States, all of the relevant states, in relation to these issues constructively. The Commonwealth does not have any unilateral powers in this space. We can only make progress by working cooperatively together. There are particular issues for basin communities to work through. Let’s just see how the meeting goes today. I understand that the dinner last night was very constructive. Some of these issues are difficult to work through because they are different perspectives depending on which part of the river and which State you are in. We understand that. Let’s just see how these conversations progress.
PETER STEFANOVIC: Okay, Finance Minister really appreciate your time. Thanks for joining us from Perth live this morning. Mathias Cormann there, thank you.