Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Thursday, 23 July 2020
BRETT MASON: Finance Minister welcome back to SBS.
MATHIAS CORMANN: Good to be back.
BRETT MASON: Gross debt forty-five per cent of GDP is a staggering number. But comparatively it is actually good news for Australia.
MATHIAS CORMANN: Australia is in a good position compared to most other countries around the world, both from a health outcomes point of view, but also from an economic and fiscal point of view. It is a very challenging set of fiscal numbers. But we know why we are here. We are here because of the economic impact of the coronavirus pandemic and the impact that that has had on our Budget bottom line.
BRETT MASON: Labor says that the economy was deteriorating before people knew what coronavirus was. Two thirds of that debt was piled on, they say before the pandemic hit. Is it fair to say that the economy was deteriorating before this pandemic hit?
MATHIAS CORMANN: No that is not fair to say. All of the indicators where that we were in a very strong position. We had the lowest welfare dependency in about thirty years. We had the highest participation rate. We had a low unemployment rate. Of course we always deal with challenges. Australia was in a strong, economic and fiscal position. In fact we have gone into this crisis period in a comparatively strong economic and fiscal position as a result of the significant reform effort that we pursued during our first six and a half years in Government.
BRETT MASON:There has been some criticism in terms of the people that have been included from JobKeeper. Temporary visa holders for example. People that are here on skilled shortage visas who aren’t getting access beyond the superannuation program. Given the underspend on JobKeeper you weren’t convinced that that support could be extended to those temporary visa holders?
MATHIAS CORMANN: These sorts income support arrangements are always residency based. For temporary visa holders who are in Australia it is well understood they have to be able to look after their own requirements either based on their savings, their own income, or their superannuation that we have helped them get access to. If they cannot, it is really incumbent on any temporary visa holder to return home.
BRETT MASON: Even if they are here providing, filling a skills gap? A shortage of skilled workers?
MATHIAS CORMANN: If they are fulfilling a skills gap they would be generating an income. They would be in a position to look after their own needs here in Australia.
BRETT MASON: The one shining light out of all of this, is the resources sector, particularly iron ore. How big a hero has that been in terms of limiting the financial carnage of COVID?
MATHIAS CORMANN: The mining industry and the resources sector more broadly has been incredibly important to keeping a level of strength in the Australian economy. It has been very important to our economic resilience. There is no question. Export volumes have remained high. The iron more price is higher now than what it was at the beginning of this crisis. So it has been a significant support to our economy through this period.
BRETT MASON: And what about China? We seem to be relying on iron ore and we seem to be relying on people that are buying it, which is predominantly China. How important is that market in the next financial year and beyond as we begin to draw down some of this debt.
MATHIAS CORMANN: Our relationship with China is an important relationship. We want to have the best possible relationship with China. It is a mutually beneficial relationship. You are right, we are selling our iron ore into China predominantly, but that is because China needs our iron ore in order to continue to grow and develop their economy. It is a mutually beneficial relationship. We are keen to see the relationship move forward on a mutually beneficial and respectful basis.
BRETT MASON: Does our economic recovery hinge on China?
MATHIAS CORMANN: We are a trading nation. We want to sell as many Australian products and services into markets all around the world, including and in particular into China. Our trade relationship with China is a very important one. We will continue to work to ensure that it is in the best possible shape.
BRETT MASON: And in terms of paying back that debt. I asked the Treasurer this question this morning, how long it is going to take to pay back the money we are borrowing throughout this pandemic?
MATHIAS CORMANN: We are only providing updates here for the two financial years today. The medium term projections including on debt will be provided in the Budget. There is a lot of volatility at the moment. There is a lot of uncertainty in terms of the global and domestic outlook. These are matters that we would be addressing in the Budget.
BRETT MASON: Decades?
MATHIAS CORMANN: When we released the Budget last year for the 2019-20 financial year, the surplus Budget, we were projecting that we would pay down Government net debt over the decade. It clearly now is going to take longer given the expenditure that we have had to incur. But what precisely our projected trajectory is going to be moving forward that will be part of the Budget.
BRETT MASON: Finance Minister, thank you very much.
MATHIAS CORMANN: Always good to talk to you.