Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Friday, 3 April 2020
PETER STEFANOVIC: Joining me now is Finance Minister Mathias Cormann, live from Perth at the moment. Minister Good morning to you. Thanks so much for joining us.
MATHIAS CORMANN: Good morning.
PETER STEFANOVIC: So rental negotiations on the agenda at national cabinet today. What changes are coming?
MATHIAS CORMANN: I cannot pre-empt the discussions at the national cabinet this morning. But what we want to see around the country is landlords and tenants working with each other to come up with fair and equitable ways forward. There is the safety net that for those tenants who are impacted by the coronavirus and are experiencing financial distress because of the coronavirus are protected from eviction for six months. But those tenants who are not affected should continue to pay their rent in the usual way. But it is really important here for landlords and tenants to work with each other and come up with sensible and pragmatic arrangements for the next six months’ period.
PETER STEFANOVIC: Do you support the freezing of land taxes and council rates?
MATHIAS CORMANN: Of course. There are a whole range of things State governments and local governments could do. No doubt, these are the things that are being discussed as we speak.
PETER STEFANOVIC: The AustralianSuper chief Ian Silk said this morning, Minister, that the Government has seriously underestimated the number of people who will access super. He says $50 billion will be withdrawn, which is double the Government projections. Has the Government underestimated this?
MATHIAS CORMANN: We do not believe we have. Only the future will tell. In any event, there is about $3 trillion, just under $3 trillion in Australian superannuation savings. Our advice is super funds hold about $300 billion worth of cash. So even if Ian Silk is right and this is what happens, this is still only a very small component of what is held in superannuation and in particular what is held by superannuation funds in cash. APRA the prudential regulator has clearly advised us that this is easily feasible for superannuation funds around Australia without causing any difficulties whatsoever.
PETER STEFANOVIC: So he could well be right though?
MATHIAS CORMANN: An estimate is an estimate. His estimate is his estimate. We are relying on Treasury’s estimate. Treasury’s estimate is that this would involve about $27 billion in superannuation savings being accessed early. We have to remind ourselves, this only formalises an existing scheme. We already have a scheme where you can access superannuation early under hardship provisions. We just made very clear that these hardship provisions can apply in an efficient manner in this context. I think that all Australians, all Australians who look at this objectively, would agree that this is an appropriate circumstance to give people access to their superannuation, to a proportion of their superannuation under hardship provisions.
PETER STEFANOVIC: Okay Minister, just now on the shear amount of money that is being spent from the Government over the past week or so, it is all patch up just jobs that have had to be arranged fairly quickly. How on earth do you unwind all of this once it’s all over?
MATHIAS CORMANN: All of these things that we are doing are temporary. They are not structural. They are put in place on a time-limited basis. In terms of the legislation that puts all of these things in place, it is sun-setting legislation, which will come to an end. There will be an opportunity to be somewhat flexible depending on how long this takes. As the Prime Minister has said, we expect this to take at least six months, it could well be a little bit longer. So there is an opportunity at the edges to extend this a bit. But fundamentally this is all temporary. It is not structural. It is not baked in to our Budget projections over the medium term.
PETER STEFANOVIC: So rather than a hard snap back as the Prime Minister referred to yesterday, it will be a gradual easing?
MATHIAS CORMANN: We expect a significant bounce back on the other side of this. We are prepared to make the necessary judgements depending on how this unfolds. One of the key features of all of this is that it is very hard to predict from one week to the next how the health and the economic side of this continues to evolve. The Government has shown flexibility in adapting, amending and adjusting our response to the coronavirus impact as clearly the impact has evolved. That is what we will continue to do. But hopefully at the end of six months there will be the opportunity to return back to normality. On the back of a bounce back we certainly would expect all these temporary measures to fall away.
PETER STEFANOVIC: But you have got six months as a reasonable time line there. But could it be twelve months? Or could it even be eighteen months? Because really you are not going to be able to stop these restrictions until there is a vaccine.
MATHIAS CORMANN: I do not have a crystal ball. I certainly do not expect it to be twelve or eighteen months based on what we know now and based on what we have been able to observe overseas… interrupted
PETER STEFANOVIC: But it could though? It could.
MATHIAS CORMANN: A lot of things could or could not. I cannot speculate for you through a crystal ball gazing exercise. Based on the experience that we have observed overseas, our assessment is that a six-month window is the most likely scenario. But we will continue to monitor and adjust our response as events unfold.
PETER STEFANOVIC: Will the debt ceiling have to be raised again?
MATHIAS CORMANN: These are things for us to assess as things move forward. We have already increased the debt ceiling to $850 billion as part of recent announcements. We will continue to monitor that. If and as appropriate, these decisions will be made.
PETER STEFANOVIC: It could go to a trillion?
MATHIAS CORMANN: Again, I am not going to speculate.
PETER STEFANOVIC: Okay. You’re going to have to come up with some radical measures I would have thought to be able to pay down his debt. The Treasurer has already said this week that it is going to take a long, long time to be able to pay this off. Where do you start here? Will we have to increase taxes?
MATHIAS CORMANN: That would be precisely the wrong thing to do. What we have to do is to make sure that our economy bounces back strongly and that we have increased revenue flows again on the back of a strongly growing economy. But just to put the debt situation in context, yes, when we were forecasting a surplus in the 2019-20 Budget at Budget time last year, it was going to take all of the next decade to pay off government net debt back down to zero. We have since then, incurred significant additional expenditure. We are clearly not going to be in surplus. We are going to be in deficit for at least the next few years. Clearly, there is going to be a delay in the trajectory getting back to zero government net debt. But, the best way to get back into a stronger fiscal position is by making sure the economy has the best possible opportunity to grow strongly on the other side so that we can maximise the level of revenue generated through that process.
PETER STEFANOVIC: Okay, well are changes to GST and franking credits now more certain?
MATHIAS CORMANN: Sorry? What sort of changes?
PETER STEFANOVIC: Would there have to be changes, would changes to GST or franking credits, would that be more certain than raising taxes?
MATHIAS CORMANN: No. We have been very clear. Whatever way you want to describe it, we are not going to start pushing for increased taxes. Whatever technical terms you want to put around it that is not on the cards. The best way to get the Budget back into a strong position on the other side is by getting the economy in the strongest possible position on the other side, by getting Australians working again and paying income tax. And by being able to spend less on the back of more Australians back in work and not requiring the access to JobSeeker payments. I say again, the commitments that we have made are temporary. They are not structural. They are not baked into the Budget. We had a strong and sustainable Budget trajectory before all of this happened. Clearly we would fully expect to get back onto that trajectory once we have gone through this temporary period.
PETER STEFANOVIC: Okay. There are more and more people calling for the people in the public sector to take pay cuts. Should MPs have to take pay cuts?
MATHIAS CORMANN: We have made a decision to freeze salaries in the current context. I have written to the Remuneration Tribunal, urging them to freeze pay rates. I am not sure how this sort of suggestion would help in the context of the Budget challenge. It is essentially at the margin. I think that MPs and public servants are working very hard right now to work through this period.
PETER STEFANOVIC: How long would that freeze last for?
MATHIAS CORMANN: These decisions are made on a yearly basis. The Remuneration Tribunal and the Australian Public Sector Commission do make these sorts of decisions independently. But we have certainly indicated that for this year there should not be an increase.
PETER STEFANOVIC: Just over in your next of the woods, Minster, the Premier will be closing the borders on Sunday. Are you going to be right to make it to Canberra next week?
MATHIAS CORMANN: Yes. I am having regular engagements with the Premier here in Western Australia, coordinating federal and state matters. Appropriately, the Government here in Western Australia has provided that federal Members of Parliament from Western Australia are essential workers for Western Australia and are exempt from the ban under the essential worker exemption.
PETER STEFANOVIC: Okay, alright, Finance Minister Mathias Cormann, really appreciate your time this morning. Thanks for joining us.
MATHIAS CORMANN: Always good to talk to you.