Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Thursday, 23 July 2020
OLIVER PETERSON: The Federal Government it is projecting the Federal Budget deficit will be $184.5 billion this financial year. Originally don’t forget it was a $5 billion surplus. While this financial year, net debt, it will balloon to $677 billion. On the line live from Canberra the Finance Minister Mathias Cormann. Good afternoon.
MATHIAS CORMANN: Good afternoon Oliver. Good afternoon to your listeners.
OLIVER PETERSON: This is the deepest economic downturn since the Great Depression, our largest Budget deficit since World War II. How worried should we be about these numbers?
MATHIAS CORMANN: This is clearly a very challenging set of numbers, but we also know why we are in this position. It is clearly overwhelmingly the result of the massive fiscal impact of the coronavirus pandemic, a one in a one-hundred-year pandemic. So that is on the downside, but on the upside it is also the case that we are in a better, stronger more resilient position than most other countries around the world, which is a good foundation from which to maximise the strength of our recovery moving forward. Australia has outperformed nearly every other country when it comes to health, economic and fiscal outcomes. That is going to stand us in good stead.
OLIVER PETERSON: So, you say we are better stronger and more resilient at the moment. But do these updates assume that we get back to normal as best as we can next year. In other words there is a vaccination and that the international borders reopen?
MATHIAS CORMANN: No we are not assuming a vaccine. I should just say there remains a high level of uncertainty when it comes to the global and domestic economic and health outlook. This continues to be a fluid situation, which is why in this update that we have provided today, contrary to what we normally do, we are only presenting two-year numbers. We delayed the budget earlier this year to October for that precise reason. That is when we hope to provide better information about the four year forward estimates period and medium term projections on the basis of more current information at that point in time.
OLIVER PETERSON: When we see those projections, do you imagine it will get worse before it will get better for example could we see net debt reach $1 trillion Mathias Cormann?
MATHIAS CORMANN: Since the beginning of this year things have actually gotten better than what we had feared. When we looked at this in March, we were fearing and planning for the worst. We were expecting a serious lockdown situation for 6 months straight. As it turns out in the middle of May, we started to ease restrictions in most parts of Australia. Right now in all parts of Australia with the exception of Victoria and parts of New South Wales we are in a pretty good position with a very low number of active cases, virtually no community transmission at all and the economy is starting to recover. So in March we thought the JobKeeper program would cost us $130 billion. Only two or three months later the outlook had changed where we expected it to cost us just $70 billion. It is still a very high number of course, but as you can see fluctuations in a situation that is highly volatile and uncertain can go both ways. There will be some swings and roundabouts to a degree. But we went into this crisis from a position of comparative fiscal strength as a result of the Budget repair effort that we undertook over the last six and a half years.
OLIVER PETERSON: How big an economic problem is the lockdown of greater Melbourne causing the country?
MATHIAS CORMANN: The lockdown over the six-week period will detract $3.3 billion or about three quarter of a percent from GDP growth in the next quarter. So it is having a significant negative effect. We certainly, from both a health and an economic point of view, we would like to see and all Australians would like to see Victoria get on top of this outbreak as soon as possible. But we always knew that there could and that there would be localised outbreaks. We have to ensure that we can manage things in the economy with this highly infectious coronavirus remaining with us. We have to make sure the economy is as COVID-safe as possible with the coronavirus still with us.
OLIVER PETERSON: As we look as those headline figures, $677 billion net debt over the next financial year. Is the Government or even future governments are they going to have to increase taxes to pay for these eye watering levels.
MATHIAS CORMANN: No. The way to get on top of this debt is the same as we have done in the past through history and including in our most recent past. That is by maximising the strength of the economic recovery and achieving above trend growth so that we generate more revenue and incur lesser expenditure on welfare payments. The worst thing that we could do right now is to increase the tax burden on the economy, because we would be harming what will be in the early stages a fragile recovery that we want to strengthen. We will actually look at providing tax incentives and lower taxes where we can in order to strengthen the recovery on the other side.
OLIVER PETERSON: Alright so for our children, our grandchildren, will hundreds of millions of dollars of government debt become the new normal? We will have to carry that burden for the rest of their lives?
MATHIAS CORMANN: No. Again I would say our position, including our debt position, compared to other countries remains comparatively better. We actually do have fiscal capacity. What was the alternative? Should we not have provided the support into the economy to protect jobs and to protect livelihoods? The disruption and the harm to people all around Australia would have been so much more significant if we did not provide the level of fiscal support that we have provided over the last five to six months. And that we will probably need to continue to provide for some time yet. You have to always look at what the counter factual would have been. There was not really any other alternative with the sorts of decisions that we made.
OLIVER PETERSON: Talking about protecting jobs, the unemployment rate is set to peak by 9.25 per cent by December. What plans are there to save and create jobs between now and the end of the year? Was it wise to wind back the programs like JobKeeper, given you are expecting the unemployment rate to go up?
MATHIAS CORMANN: The economic recovery has actually started. If you look at the month of June for example 280,000 Australians re-joined the labour market, the participation rate went up, hours worked went up, underemployment went down, and 210 000 jobs were restored in the economy. So as restrictions in the economy are lifted we would expect the recovery to strengthen. That is what we want to see. We do need to transition back into the new normal as soon as we can so that businesses around Australia have the best possible opportunity to build a successful viable and profitable future. What is our plan to create more jobs? We are working across the board on policies to help businesses be the most successful they can be so that they can hire more Australians into the future, whether that is through tax incentives whether that is through our deregulation agenda, reducing the costs of doing business, whether it is through our free trade agenda helping exporting businesses get better access to markets around the world, because more successful exporting businesses will hire more people, more jobs, more infrastructure. Across the board wherever you look we are working to help create more jobs. But in the end nine out of ten jobs in the economy are created by the private sector. It is businesses around Australia, viable, successful, profitable, businesses around Australia that will be the key to job creation into the future.
OLIVER PETERSON: Now I am sure you would have seen in the Financial Review this morning talking about businesses trying to be successful and viable. Five of the top ten Australian towns with the majority of businesses on JobKeeper are here in WA. Exmouth, Margaret River, Shark Bay, Northampton, the City of Vincent. Now obviously four of those are tourism towns in particular who aren’t going to see too many people other than West Aussies for a little while. What would the advice be to those particular towns Mathias Cormann? Or should the state border be coming down?
MATHIAS CORMANN: Firstly I have said this on the record many times, while I understand there ought to be a fence around those areas where there are local outbreaks in Victoria and parts of New South Wales, there is absolutely no reason why state borders remain closed towards the Northern Territory, South Australia, Tasmania, or Queensland. All of these jurisdictions have lower active cases and virtually no community transmission at all. They are in the same or better position than Western Australia. There is absolutely no reason why state borders would remain closed towards those states. Those state border closures are costing jobs. They are harming businesses and they are harming working Western Australians. Having said that, for those businesses in those areas on the front line of the economic impact of the coronavirus crisis, they will continue to be eligible for Job Keeper. So we will continue to provide support for those businesses that continue to face challenges and significant drops in their turnover compared to what they previously were able to achieve.
OLIVER PETERSON: Will the Federal Government plan to extend the early access to super scheme?
MATHIAS CORMANN: We have made a decision to extend that in line with the other decisions that we have made at the end of December. So we won’t be providing an additional wave of access so to speak. But we will give people more time to make the decision on whether or not they need early access to their superannuation in order to manage their financial affairs in an environment that continues to be very uncertain.
OLIVER PETERSON: Is it wise of people who are accessing their super, won’t this put further strain though on the welfare budget in years to come?
MATHIAS CORMANN: We are dealing with a crisis. We are doing everything we can to provide as much support to individual Australians to manage their affairs as we can. This is people’s money. There is a standing arrangement where in situations in hardship circumstances people can access their superannuation early. This is an extension of that. We think that people are well able to make responsible decisions with relation to their personal affairs in this context.
OLIVER PETERSON: On another matter, did you get involved and help with Kerry Stokes hotel quarantine exemption in April, forwarding on a medical certificate to the Premier?
MATHIAS CORMANN: I get constituent enquiries across the board from many different people. I do not comment publicly about individual constituent enquiries. That would be entirely inappropriate. But having read the story that appeared in the media today, let me reassure you and your listeners that I have not been involved at any point in time in relation to any decisions about hotel quarantine arrangements. These are matters that are appropriately dealt with exclusively and independently by the authorities in Western Australia, the police commissioner and the WA chief health officer which is of course appropriate.
OLIVER PETERSON: So you may not have been making the decision, but did your forward on an email with Kerry Stokes’ medical certificate to the Premier’s chief of staff Guy Houston.
MATHIAS CORMANN: Oliver you can ask me that question as many times as you like in as many ways as you like … interrupted
OLIVER PETERSON: It’s a yes or no answer Mathias Cormann.
MATHIAS CORMANN: I have answered the question. I get lots of constituent enquiries. I do not publicly comment on constituent enquiries. What I do with constituent enquiries is that I put people in touch, as appropriate, with the relevant authorities. That is part and parcel of my job as a Senator for Western Australia. People who come to see me or approach me as their Senator for Western Australia, they have to have the confidence that I will work in relation to their matters in an appropriately private and confidential manner. That is what I will continue to do.
OLIVER PETERSON: My inbox has been full this week for dozens of West Australians who want to come back to WA, they’re being denied a G2G card so they can simply come home. Should they just get in touch with your office because you seem to have the levers to help West Australians get home?
MATHIAS CORMANN: Let me tell you, I have dealt with many cases of constituents in West Australia, whether their family members were stuck on a cruise ship out off the coast of South America, or whether it was in relation to West Australians that were stuck in other parts of Australia or other parts of the world. I have been dealing with lots of immigration, border and other such matters. My team works to serve the constituents in West Australia. That is what I continue to do to the best of my ability.
OLIVER PETERSON: Mathias Cormann appreciate your time, thank you very much.
MATHIAS CORMANN: Always good to talk to you.