Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Thursday, 23 July 2020
PATRICIA KARVELAS: Finance Minister Mathias Cormann is my first guest this afternoon. Mathias Cormann, welcome.
MATHIAS CORMANN: Good to be here.
PATRICIA KARVELAS: Debt and deficit used to be public enemy number one. Do today's numbers and commitments mean that are you prepared to go even further into debt if needed?
MATHIAS CORMANN: This is a very challenging fiscal position, but we know why we are here. We are here because of a one in a 100-year pandemic with devastating effects on the global economy and a very negative effect on our economy here in Australia with consequences for our Budget. We had to put significant fiscal support in place and there was a hit on our revenue and on our expenditures as a result of what was happening in the economy. But even after this, we are still in a comparatively better fiscal position. Our debt position by international standards is still lower as a share of GDP than that of many other countries even before going into this crisis. The answer to your question is that we will continue to make judgements as required and if further support is required we do have further fiscal capacity to provide that support. The reason we do is because of the hard yards that we have done during our first six and half years in Government to repair the Budget to get ourselves into a more resilient position.
PATRICIA KARVELAS: So Minister, you are saying that if the health crisis requires it, that the Government is prepared to go into further debt and deficit to ensure that the economy is looked after and that Australians are looked after?
MATHIAS CORMANN: We will continue to make the decisions that are required in order to provide the appropriate levels of support to the economy, to working Australians, to protect livelihoods and to also...interrupted
PATRICIA KARVELAS: Minister, is there any limit to that? Are you prepared to go further into debt without any boundary or limit?
MATHIAS CORMANN: This continues to be an evolving situation. There are high levels of uncertainty in terms of the global and the domestic economic outlook, in terms of the health outlook. In Australia we are in a comparatively better, stronger position on all those fronts, health, economic and fiscal, but we only know what we know now. We do not know what the future holds and we do stand ready to make further decisions, as we have in the last six months. But the limit is that we will make decisions as appropriate. We will make sensible decisions. But we do have fiscal capacity to provide further support if and as required.
PATRICIA KARVELAS: And just to check because we have heard this, before but I want to hear what your view is on this, ideological constraints, are they still gone? Is that the way the Government is approaching this, ideology is dead?
MATHIAS CORMANN: Of course we make decisions based on our policy values and the policy and political values that we have consistently pursued through Government. We will continue to support individual freedom, free enterprise, reward for effort, encouraging people to stretch themselves, seize opportunities and have a go. We will continue to ensure that we provide the right encouragement and incentive for businesses to invest into their future growth and success, so that they will hire more Australians again. We want to restore as many jobs as possible, keep as many jobs as possible and create as many new jobs as possible moving forward. We will continue to make decisions based on our policy and political values as we have demonstrated over our last six and a half years.
PATRICIA KARVELAS: So, if it is about your political philosophy, that means ideology isn't dead, isn’t it? We were told that ideology would be put aside. If it is based on your political philosophy, does that mean we are going to hear a return to the language of debt and deficit and become obsessed with paying it down? I am just trying to get a picture of…interrupted
MATHIAS CORMANN: I will let you provide the commentary…interrupted
PATRICIA KARVELAS: I'm asking you a question.
MATHIAS CORMANN: You are providing commentary and that is fine. You are entitled to do that. I tell you what we will continue to do as a Government. We will continue to make pragmatic decisions, but in the context of our policy and political values and principles. We will continue to make decisions based on giving all Australians today and into the future the best possible opportunity to get ahead in the context of a very challenging environment. A very challenging environment…interrupted
PATRICIA KARVELAS: It certainly is. These figures assume a six-week lockdown in Victoria and the continuation of relaxation of restrictions in the other states too. We are two weeks into the Victorian lockdown, I am in Melbourne, there are 403 new cases announced today. This forecast seems incredibly optimistic, Minister. I mean is that really realistic that we are going to be out of lockdown in Melbourne in four weeks?
MATHIAS CORMANN: We have been quite open and transparent about the fact that it is very hard at this point to make credible forecasts. The reason we have delayed the Budget is precisely for that reason. The reason we are providing numbers for two years and not the usual four years forward estimates period and the medium term projections is precisely that reason. The numbers in this update today are based on the information as it stands today. It is based on the best available advice and the best available information. This situation will continue to evolve. As better information becomes available we are going to have to reflect that in further updates. That is the way it would normally work. In this current context where things change so quickly and there is so much uncertainty you would expect more volatility than usual. But that can also work in both directions. Let me just remind you and your viewers that in March when we were expecting the worst and preparing for the worst, we thought that the JobKeeper program would cost around $130 billion based on an extensive six-month lockdown. As it turns out we were able to ease restrictions sooner and the revised cost estimate was significantly less. So there will be swings and round abouts in both directions…interrupted
PATRICIA KARVELAS: Does that mean a prediction about a six-week lockdown in Victoria, because we keep seeing these very alarming numbers, that you are not convinced that is going to happen, are you?
MATHIAS CORMANN: It is not a prediction. It is an assumption based on the information in front of us right now…interrupted
PATRICIA KARVELAS: It looks like it might be a wrong assumption, right?
MATHIAS CORMANN: It was the right assumption at the time the document was put together based on the information that we had from the State Government in Victoria. It could well change. You are quite right. We are not sugar coating any of this. We are dealing with a highly volatile uncertain environment. We are making the best possible judgements in that context. We are quite transparent about the qualifiers that we are putting around those numbers. Those numbers are likely to change. Estimates are estimates at the best of times and actuals are very rarely what you estimate in the lead-up. In the current climate that is even more the case than usual and I think that everybody around Australia, every reasonable person around Australia would understand that.
PATRICIA KARVELAS: Are you certain then that international borders will open in January and that Australia will be taking people from around the world by January realistically?
MATHIAS CORMANN: Again, only the future will tell. At this point in time and as we were putting the document together, that was the working assumption…interrupted
PATRICIA KARVELAS: But again it is too optimistic isn’t Minister?
MATHIAS CORMANN: But the thing is Patricia, everybody knows what the assumption is and everybody can make their own judgement in relation to this. If this is delayed, then there will be further adjustments to the numbers. It is not as if we are somehow hiding this. We are being quite open and transparent about the fact that this is a rapidly evolving situation. Things will change in both directions moving forward. Things could be better in some areas. Things could be worse in some areas. At some point in the future, the next opportunity will be the Budget, there will be a further update based on more up to date information at that point in time.
PATRICIA KARVELAS: Do you think in that Budget that tax cuts should still go ahead?
MATHIAS CORMANN: We have legislated our personal income tax cuts. They are locked into legislation and clearly the worst thing that we could do at this point, as we seek to maximise the strength of the recovery would be to increase the tax burden on the economy. We want to repair the Budget moving forward on the back of stronger growth. Not on the back of higher taxes…interrupted
PATRICIA KARVELAS: That is interesting. I want to go to repairing the Budget because you did not outline today any plan to pay down the debt. Will you be outlining in October a plan to pay down this debt?
MATHIAS CORMANN: We will be providing in the Budget, as we do every year in the Budget, a medium-term outlook, medium-term projections. In 2019-20, when we delivered the Budget last year, the projection was that net debt would be fully paid off over that medium-term period. Now clearly, given the level of expenditure that we had to incur, that will take longer than we anticipated this time last year. But there will be a medium-term projection, including a medium-term debt projection in our Budget in October. Absolutely.
PATRICIA KARVELAS: Will it involve a plan to pay it down? Are you in any rush to pay it down or do you accept that debt should be high because or is inevitably going to continue to be high and there should be no rush to pay it down?
MATHIAS CORMANN: Firstly, I am not going to deliver the Budget for you today…interrupted
PATRICIA KARVELAS: That is a real pity Mathias Cormann.
MATHIAS CORMANN: I am sure you think that is a pity, but that is also the responsible course of action. We will make judgements on what is appropriate over the coming weeks and months as we put the Budget together. What I would say to you in a general sense, we will be presenting openly and transparently as we always do what our approach, our medium-term approach to Government debt will be in the Budget. We need to repair our Budget again as soon as we can and as soon as we responsibly can. We will continue to make decisions in the context of the economic environment that we are operating in and we will continue to make these decisions in a way that will help maximise growth and employment opportunities for Australians.
PATRICIA KARVELAS: Labor says you have provided no plan today on job creation and there will be two million unemployed Australians in December. What is your plan for job creation?
MATHIAS CORMANN: Well, firstly, I am just not going to get into Labor's politics…interrupted
PATRICIA KARVELAS: Alright I will take that bit out, what is your plan for job creation?
MATHIAS CORMANN: I was about to go there. We have been making decision after decision over the last six months which are reconciled in this update. This is not a Budget it is an update. We have made decision after decision to ensure that we protect jobs and put ourselves in a position to create new jobs moving forward. The JobKeeper initiative in itself is there to protect jobs. Unemployment would be 5 per cent higher if we had not put the JobKeeper program in place. 700,000 jobs were protected through the JobKeeper initiative. We have been pursuing incentives for businesses to invest in their future growth, like the accelerated depreciation arrangements, like the instant asset write-off. Businesses investing in their future growth means that they put themselves in a position to hire more people into the future. We are investing in skills, we are pursuing industrial relations reforms, we are pursuing an ambitious infrastructure investment program, we are pursuing an ambitious free trade agenda, which is designed to help our exporting businesses get better access to markets around the world. More successful exporting businesses will hire more Australians, which means more jobs. We will continue to pursue our energy reforms. You name it. Our deregulation agenda, to reduce the cost of doing business so that more successful businesses hire more Australians. Jobs, jobs, jobs is what we are focused on everywhere. Before we went into this crisis, our employment growth in Australia was more than twice the rate across the OECD.
PATRICIA KARVELAS: I am trying to politely get my question in. I think I have just managed that. Always a difficult balance. Job creation though, you have outlined the policies that exist. Can we expect more spending on making jobs in coming months? Is that where the Government's thinking is at? Will you invest more money on making new jobs?
MATHIAS CORMANN: Jobs will be created by business. We are focused on jobs, jobs, jobs every single day in Government. We have been focused on jobs, jobs, jobs every day in Government since September 2013. When we came into Government we inherited a weakening economy and rising unemployment. We turned that situation around. Creating 1.5 million new jobs before this crisis. The employment growth in the last financial year before this crisis 2018-19 was 2.5 per cent. One of the highest employment growth rates in the developed world. So we will do this, we will be able to do this again. Our entire policy agenda across Government is focused on giving businesses the best possible opportunities to be successful so they can hire more people, creating more jobs.
PATRICIA KARVELAS: Mathias Cormann, thank you so much for joining us this afternoon.
MATHIAS CORMANN: Always good to talk to you.