Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Thursday, 12 March 2020
FRAN KELLY: Small to medium sized businesses are the focal point of the Government’s emergency response to the coronavirus, which has now formally been declared a pandemic by the World Health Organisation. The response is expected to be in the order of $20 billion splashed on a range of measures to keep the sector humming and to stave off a recession. The measures include company cash handouts of up to $25,000 and wage subsidies to keep 120,000 apprentices in work. The stimulus plan is also expected to include on off bonus payments for millions of pensioners and Newstart recipients. Finance Minister Mathias Cormann joins us now. Minister welcome back to Breakfast.
MATHIAS CORMANN: Good morning Fran. Good to be back.
FRAN KELLY: Well, we understand that the package is going to be in the order of $15-20 billion, will that be enough to keep a recession at bay?
MATHIAS CORMANN: The package represents about just under 1 per cent of GDP. So it is a sizeable package to protect the livelihood of Australians, to keep Australians in jobs, to keep businesses in business and to provide targeted support to vulnerable Australians. It is a scalable package. If more is required, we will be able to do more. Certainly our objective is to keep the Australian economy growing and to protect the livelihoods of Australians.
FRAN KELLY: We may as well deal with this now, because by this time of the year you and the Treasurer are usually already starting to turn your head and your time to the preparation of the Budget. Are you already preparing a second tranche in your mind as you look at the Budget. And does that, have you have already given up the notion of a Budget surplus?
MATHIAS CORMANN: The work on the Budget is happening in the usual way. We will be releasing all of the numbers in the Budget in the second Tuesday in May. When you deliver a stimulus package of this size, I think people can add up the numbers. They can add up what it means in terms of the Budget surplus. We already were under significant pressure with the impact on revenue from the economic impact of the coronavirus. This is not going to be a surplus year in 2019-20.
FRAN KELLY: Let’s go to some of the measures. The most expensive of the measures we know about so far is the $6.7 billion you will be spending on cash payments to around 690,000 businesses, up to $25,000 a piece to firms with turnover under $50 million. How will these payments work?
MATHIAS CORMANN: It will be worked through the tax system. The way it works is when eligible businesses which withhold tax to the ATO on their employees’ salaries and wages will receive a payment equal to fifty per cent of the amount withheld, up to a maximum payment of $25,000, a minimum payment of $2000. That is costing about $6.7 billion all up.
FRAN KELLY: That’s a lot of money just to hand over to a small business. How does the Government know that the business will spend on the intended purpose, which is to pay wages, to keep staff on. Isn’t there a risk that some employers will simply pocket the cash?
MATHIAS CORMANN: What we know is that businesses around Australia which have seen a significant downturn in their turnover will find it very, very hard to hold onto staff without this sort of support. This is a moment when all of us have to pull together, and all of us have got do the right thing to keep Australians in jobs and to keep businesses in business. We are expecting … interrupted
FRAN KELLY: I guess I am just wondering is there any strings attached, any guarantees that if you get this $25,000 cheque that you don’t lay off your casuals or any staff.
MATHIAS CORMANN: In the end, all of us and that includes all of the small and medium sized businesses benefiting from this, will want to be there for the strong recovery on the other side of the coronavirus, spreading across Australia. They will need their staff on the other side. What we say to all of those businesses, we are doing our bit to support you. We want you to support your staff through this period and to ensure that all of us are there to maximise the strength of the recovery on the other side. Business do not just want to lay off … interrupted
FRAN KELLY: I understand the sentiment, but there are no strings attached to this, is all I was clarifying.
MATHIAS CORMANN: This is support for business to keep their staff employed. Clearly different businesses will be impacted by the spread of the coronavirus in different ways. Some businesses are likely to be not that impacted, but other businesses will be very severely impacted. This is providing support to help them keep people employed.
FRAN KELLY: In a time like this it is urgent to get the money out quickly. You’ve got a plan to save the jobs of around 120,000 young apprentices. Fifty per cent wage subsidy for apprentices and trainees, up to $7,000 a quarter. Again these subsidies expire on September 30. Is there any measure to stop an employer cashing in on the handouts between now and then and then getting rid of their apprentices?
MATHIAS CORMANN: These are apprentices that are overwhelmingly in these positions now. These businesses have kept these apprentices in place now. We are helping them keep these apprentices through a difficult period, an initial period of nine months. Again, this is to help ensure that through this period, as businesses are facing particularly significant cash flow challenges that they are keeping those apprentices in their positions so that they are going to be there on the other side when we will be experiencing and taking advantage of the great recovery.
FRAN KELLY: Apprentices are often the first to be sacked in a downturn, this is what you’re trying to protect against, but so are casuals. The ACTU wants all workers, full-time, part-time and casuals, to be given two weeks’ paid leave if they are forced to self-isolate. If the PM is sincere when he calls this a team Australia moment, will the Government look after all those workers who could be forced to stay at home for two weeks with no financial support because obviously the risk is, if people don’t get their wages, we know some will go to work because they need the pay cheque.
MATHIAS CORMANN: The Minister for Industrial Relations has been meeting with employer groups and unions and they are working through some of these issues. Some unions are seeking to fundamentally change the industrial relations system in the context of this. That is not something that we will be able to do, but we are working… interrupted
FRAN KELLY: This is really a short-term measure that people are calling for, it’s basically to cover the two weeks paid leave if you have to self-isolate. Is that fair enough?
MATHIAS CORMANN: All Australians, ultimately, are able to access relevant support through our welfare system if and as appropriate. The Prime Minster and the Treasurer will be making some further announcements in relation to targeted support to Australians in the welfare system later today.
FRAN KELLY: The economic problems are not just on the supply side, they’re also with consumer demand which is being hit hard. After criticising Labor’s cash splash response to the GFC and promising not to repeat the mistakes of the past, the PM has confirmed you will be handing cash payments to pensioners and Newstart recipients. The Rudd Government mailed out $900 cheques during the GFC, will you be matching that?
MATHIAS CORMANN: No. The first stimulus package of the Rudd Government was a package that we supported, is the first point to make and that included … interrupted
FRAN KELLY: It’s very similar to this package, really, wasn’t it?
MATHIAS CORMANN: The first package was targeted and proportionate and it’s a package that we supported and it focused on principally pensioners and relevant welfare recipients. The second package which included pink batts, overpriced school halls and indiscriminate payments to just about everyone across Australia, including these $900 cheques to dead people, that is what we opposed as reckless and irresponsible. What we will be announcing later today is a well-targeted, proportionate and appropriate payment, which will very much focus on the vulnerable and welfare recipients in the community. That is something that we supported in this form when it was done by the Rudd Government about 10 year ago.
FRAN KELLY: Okay, but it will be essentially a cash splash. I mean, $25,000 up to for small business and cheques for pensioners and Newstart recipients, yes?
MATHIAS CORMANN: A very significant part of the package announced today, which has already been announced in the papers this morning, is the significant expansion of the instant asset write off, lifting the capacity for businesses to make investments of up to $150,000 for businesses with a turnover of up to $500 million as long as they invest by 30 June 2020. That is designed to ensure that businesses invest substantially now in their future success so that we can maximise the recovery on the other side of the coronavirus spreading across Australia.
FRAN KELLY: And do you think there might be a problem with that given the interruption of capital equipment coming from the providers, given the disruption to the supply chains?
MATHIAS CORMANN: In the end, what are you suggesting, that we should not try to bring investment forward? There will be some challenges, but this will provide the opportunity for businesses, which are in a positon to do so, to bring investment forward. As long as they invest in their future success by the purchase of cars or equipment or whatever that they need in terms of capital assets to expand their business into the future. We have seen the success of this measure in the past at a much lower level. Up until now, it was for purchases or investments up to $30,000 for businesses with a turnover of up to $50 million, so we have supercharged that to $150,000 and $500 million in turnover respectively. We do believe that this will help encourage significant investment over the next two or three months.
FRAN KELLY: Okay, Minister, just a couple of quick final questions. A lot of these measures will need legislation, how soon can you get all this money washing through the economy?
MATHIAS CORMANN: Most of that money will hit the economy in this financial year, by the end of June. We will be taking legislation to the Parliament when we next sit in the final sitting week in March. The objective is to get this out there as soon as possible.
FRAN KELLY: And at the start of this interview, you conceded that the Government will not deliver the surplus it promised. When will there be a surplus?
MATHIAS CORMANN: The key with this package today is that it is temporary and that this will not impose a structural burden on the Budget. This will be a temporary level of support into the economy. What the precise numbers will be and what the revised forecasts and projections will be, that will be reconciled in the Budget on the second Tuesday in May.
FRAN KELLY: Is the Government going to promise to deliver a surplus in the next year?
MATHIAS CORMANN: Again, I am not going to update the numbers for you here today. We have provided for a temporary, sizeable but a well-targeted stimulus package. The fiscal reconciliation will be updated in the Budget.
FRAN KELLY: When Wayne Swan promised a surplus and failed to deliver, the Government gave him hell for the next five or six years. Do you expect Labor to do the same to you? You’ve promised a surplus, you’re not going to deliver.
MATHIAS CORMANN: I think the circumstances were very different. It was well after the Global Financial … interrupted
FRAN KELLY: Labor had a global financial crisis.
MATHIAS CORMANN: Again, I think you are forgetting your history here. Wayne Swan promised four surplus years well after the global financial crisis, well after the global financial crisis. But in any event, I think that Australians understand while the media and our political opponents might be interested in the politics right now, I think that people across Australia understand that we are dealing with a very particular challenge right now, a very significant public health shock with significant economic implications and that it is incumbent on us to make decisions that are right for Australians and right to keep Australians in jobs and Australian businesses in business.
FRAN KELLY: Mathias Cormann, thank you very much for joining us.
MATHIAS CORMANN: Always good to talk to you.