Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Sunday, 7 June 2020
KIERAN GILBERT: For more on that and other news of the day let’s go live though in the meantime to Perth. The Finance Minister Mathias Cormann joins me. Minister thanks so much for your time as always.
MATHIAS CORMANN: Good morning.
KIERAN GILBERT: Let’s start with the confirmation over the last week that we have entered formally, a recession. Is this the recession we were made to have by COVID-19?
MATHIAS CORMANN: Everybody knows what has caused it. If you look at a 0.3 per cent contraction in the March quarter here in Australia and we compare that with what is happening in the rest of the world, a 1.8 per cent contraction across OECD countries, a 5.3 per cent contraction in the one quarter in France and in Italy, a 2.2 per cent contraction in the one quarter in Germany. What you can see here is how resilient the Australian economy continues to be. We had the drought, we had the bushfires and we had the impact of the coronavirus health crisis. All of that started to hit us hard in the March quarter. So a 0.3 per cent contraction is actually comparatively good news when it comes to our economic fortunes moving forward.
KIERAN GILBERT: In the recovery phase though is there an acceptance within the Government that there needs to be bold policy reform to enable this recovery?
MATHIAS CORMANN: We are focused on a reform agenda to maximise the strength of the recovery on the other side. That is certainly true. But we have always pursued a pro-growth, pro-opportunity policies. We had a strong plan, a clear plan to maximise economic growth before this crisis. Now the challenge in the immediate future is to ensure that we transition in the best way we can out of this temporary period of additional fiscal support in the economy into business as usual. In that context, across a whole range of areas we will continue to pursue measures that will help facilitate the strongest possible growth moving forward, that gives confidence to business to invest and that gives confidence to business to hire more Australians again.
KIERAN GILBERT: Andrew Clennell reports this morning that Josh Frydenberg has not raised the GST or GST reform with his discussions in recent weeks with State Treasurers. It has been left to the NSW Treasurer Dominic Perrottet to push for reform in that regard. Why is that?
MATHIAS CORMANN: We are focused on lower taxes. We are focused on lowering the tax burden in the economy, not increasing it. We will be engaging with State and Territory governments in relation to a tax reform agenda that also includes tax reform at a State level through the national cabinet. But at a Federal level we are very focused, as we have been in the last six and a half years, we continue to be very focused on keeping taxes as low as possible and making sure also that the tax mix is as efficient, least distorting and also though fair and equitable moving forward.
KIERAN GILBERT: Yeah, so in that context you can obviously do that while changing the consumption tax. But that part of the discussion is being led by Dominic Perrottet not your colleague Mr Frydenberg. It is interesting, why is that?
MATHIAS CORMANN: We are not focused on increasing taxes. We are focusing on lowering taxes. When it comes to the GST we did have a very thorough look at this not that long ago and the outcome of that work at the time was that it was not in our interest to move in that direction. At this stage, I have not seen anything that would change our mind.
KIERAN GILBERT: Now on the Budget deficit, the PBO is suggesting, the Parliamentary Budget Office that it would be just shy of $200 billion in the next financial year. That net debt, the additional debt up to $620 billion by the end of the decade. As a long time Finance Minister, these figures must be eye watering for you.
MATHIAS CORMANN: The figures are lower than they would have been if we had not done the hard yards to repair the Budget over the last six and a half years. Because of the work we have done for six and a half years, we went into this crisis in a stronger economic and a stronger fiscal position. Everybody knows that we had to put substantial support into the economy, supporting businesses, supporting Australians who lost their job. Everybody knows that we had to do this. Everybody knows that that was, and continues to be, very expensive. On the other side of this we will have to do the hard yards again. Get the Budget back on track, repair the Budget again, get the Budget back on a trajectory back to surplus so that we can pay down that debt. Again, if you look at our debt position in an international context, in Australia we are in relatively good shape.
KIERAN GILBERT: When you look at the foreign investment changes announced by the Government late in the week, it is all about China. Everyone knows it’s about China. But there was no mention of that country in the rule changes. Is the Government trying to be diplomatic in that sense?
MATHIAS CORMANN: Our foreign investment review framework applies to all countries equally. Australia relies on foreign investment so that we can continue to meet our full economic growth potential. In order to ensure that we can continue to attract foreign investment from all around the world, it is very important that Australians can have confidence in the integrity of our foreign investment review arrangements, so that whenever, wherever there is an issue where a potential foreign investment proposal is contrary to our national interest there is a capacity for us to take action. Since 1975 this is the most substantial reform to our foreign investment review arrangements. It is a refresh that was necessary. Countries around the world have been looking at their foreign investment review arrangements for precisely the same reasons. There are global trends and changes in the overall risk context and that is the reason why we have acted. I think that is all very clear.
KIERAN GILBERT: Were the changes made more urgent because of the recession and the potential that distressed assets could be picked up more easily?
MATHIAS CORMANN: The Treasurer had made some changes to deal with the temporary threats that we are facing in the context of the coronavirus crisis and these temporary arrangements were made very swiftly. The changes that were announced this week are clearly more substantial and longer term reforms which have been under consideration now for some time. This is not a direct response to the coronavirus crisis but it is just part of the overall reform agenda that we are pursuing as a Government.
KIERAN GILBERT: Onto the HomeBuilder package, does the means test that’s been put in place by the Morrison Government mean that it actually will minimise the impact of this, which is about saving jobs in the construction sector. If there were not to be a means test, as advocated by the Housing Industry Association and the Master Builders, the impact on the sector would have been much greater.
MATHIAS CORMANN: Sure. If the means test was not there, more people would be able to access the scheme and the scheme would be significantly more expensive. That is certainly true. We have made a judgement about what is appropriate in the circumstances. We believe that about 27,000 projects will be supported through this, over the next six months or so. We think that we have appropriately targeted the level of fiscal support, which is quite unusual. We are providing $25,000 towards a new building and towards a substantial renovation. We took the view that in all of the circumstances, it was appropriate for this to be directed towards either singles with an income of up to $125,000 or couples with income of up to $200,000.
KIERAN GILBERT: If it works, will you extend it? Are you open to extending it?
MATHIAS CORMANN: This is a scheme that started from 4 June and is in place until 31 December, in relation to projects that then start construction within three months of the contract being signed. It is a program that is in place to help bring forward demand and get activity in the residential construction sector going throughout this period given our fears that there is cliff, a demand cliff, that is going to play out and cause harm to that particular sector. We are not proposing to extend it beyond the initial six-month and a couple of weeks’ period. This is a program that is in place until the end of December.
KIERAN GILBERT: Is it fair to say on the industrial relations front the Government knows where it wants to end before it even enters this process?
MATHIAS CORMANN: The Government and everyone we believe, the Government, the unions, employers, we all know what the problem areas are. We are focused and we believe everyone is focused on talking through the well-known problem areas to see whether there are opportunities to find a consensus on how to better deal with those issues moving forward. That is what we have transparently said from the outset. That is what the Prime Minister and Christian have made very clear. The spirit with which all parties are starting to engage in these conversations is very good. We are very pleased to see the constructive and good faith nature with which people are engaging with each other. So far, so good. Hopefully, we can land some sensible outcomes.
KIERAN GILBERT: And what’s the key reform in this area in your view as someone who deals with the business community not just in your State but right around the nation? What is the key reform?
MATHIAS CORMANN: What is important here is that businesses can have the confidence to hire more Australians. In the end, we want businesses to be successful and profitable into the future. We want them to hire more Australians and we want them to be able to pay better wages over time. In that context, there have to be appropriate safeguards in place, but we are going to have to make it as easy as possible to hire people, to keep people employed and to get those projects and businesses activities onto the most successful path possible.
KIERAN GILBERT: One final one before you go. An area not your direct responsibility, but we have seen these huge protests around the country. Tens of thousands in solidarity with the protests in the United States. As a senior member of the Government, is the Government worried now about an outbreak of COVID-19 in the wake of those demonstrations?
MATHIAS CORMANN: That is a very, very serious threat. It is quite irresponsible what we have seen there. As I think about the heartbreak of families who have not been able to attend funerals for their loved ones because they were doing the right thing by taking the health advice, my heart just goes out to them. As they see people recklessly going to these sorts of demonstrations, that must be just awful for them to watch. I think it is incredibly selfish, it is incredibly self-indulgent. Yes, it does impose unnecessary and unacceptable risk onto the community.
KIERAN GILBERT: The community, though, the Indigenous community with great support from others feel that there is an injustice they need to highlight right now. The New South Wales Police, for example, have said that they acted responsibly. That there was barely any reports of violence and most engaged in masks, sanitising, tried to social distance. Does that placate you at all?
MATHIAS CORMANN: I am not talking about the substance of the issue at hand. All other things being equal, we are a free country and there is of course a right to demonstrate. But in the current circumstances, when people are prevented from attending funerals of their loved ones, to think that it is so important to pursue these sorts of activities, when it is very clear that that imposes unnecessary and unacceptable risk on the community as a whole, I believe is rather irresponsible.
KIERAN GILBERT: Minister, I appreciate your time. Thank you.
MATHIAS CORMANN: Always good to talk to you.