Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Thursday, 23 July 2020
PETER STEFANOVIC: Let’s go live to Canberra now and bring in the Finance Minister Mathias Cormann. Minister, good morning to you, thanks so much for joining us. I just want to confirm some figures that have been reported today that the financial year of 2019-20, the deficit will be $90 billion and for the next financial year it will be $190 billion. Is that accurate?
MATHIAS CORMANN: The numbers will be released later today when the Treasurer and I are releasing the July Economic and Fiscal Update. We are in a very challenging fiscal position. Everyone knows why we are where we are. The global pandemic and the hit that it has caused on our economy is also having a significant impact on our Budget bottom line, on revenue, on spending and we have had to make significant decisions to support the health system, to support the economy and jobs. We will be reconciling the fiscal impact of all of that in the update that we will be releasing later today.
PETER STEFANOVIC: The Treasurer called the numbers eye watering, what do you call them?
MATHIAS CORMANN: We are in a very challenging fiscal position. We are in a better position, in a comparatively better position, than we would have been if we had not done the hard yards to repair the Budget in our first six years in Government. We are in a comparatively position than most other countries around the world, when it comes to health, economic and fiscal outcomes.
PETER STEFANOVIC: The update only has two financial years though, it is usually four. Why only two?
MATHIAS CORMANN: Earlier this year we made a decision to delay the Budget to October because of the significant uncertainty in the global and domestic economic outlook. There continues to be significant uncertainty. There continues to be a lot of unpredictability. That is why we are providing an update in relation to the 2019-20 and 2020-21 financial years. In October, at Budget time, we will be in a position to provide the usual four year forward estimates and the medium term projections.
PETER STEFANOVIC: But if the Budget has structural integrity, as the Treasurer says, why only show the short term, why not show the medium term impact?
MATHIAS CORMANN: Well as I have just indicated to you, there is significant uncertainty about the economic outlook and all of that feeds into the forecasting assumptions and the projections that you make at Budget time. The whole point why we delayed the Budget to October is because of that uncertainty. What we are doing here is reconciling the impact of measures, reconciling the impact of the economic hit on revenue, on payments and on the Budget bottom line. We are also presenting the four year cost of the measures that we have taken.
PETER STEFANOVIC: By Parliament being cancelled though and now only two years’ worth of numbers, do you forgive some Australians for thinking that the Government might be trying to escape scrutiny here?
MATHIAS CORMANN: No, I do not think that any reasonable person would think that. Any reasonable person would realise and would understand that the Government has been dealing with an unprecedented health crisis, unprecedented in terms of its economic and fiscal impact here in Australia. That we were forced to make very rapid decisions. That clearly there is a significant impact here and that we are proceeding in as sensible and as orderly a fashion as possible in the circumstances. We have provided updates all the way through. It has already long been announced that we would have the Budget in October instead of May for obvious reasons. We are just continuing to proceed consistent with our timetable.
PETER STEFANOVIC: The reintroduction of restrictions in Victoria will cost $3.3 billion. Is that better or worse than expected? The Treasurer had already said earlier this year that a shutdown would be a billion dollars a week. So what is your view of that number?
MATHIAS CORMANN: This number is in the context of stage three restrictions just for Melbourne and the Mitchell Shire. So it is based on a narrower focus. The earlier number was based on the state wide and national implications of shutdowns. Any shutdown or any increased restrictions of economic activity is going to have a negative impact and this $3.3 billion number is the most recent assessment by Treasury based on what is currently emerging in a Victorian context.
PETER STEFANOVIC: The $850 billion total debt, I think I know what you are going to say here, but is that correct?
MATHIAS CORMANN: You can ask me these sorts of questions when you know that the Budget Update will be released later today. It is not much further to go. We are in a very challenging position and I think that every reasonable person around Australia knows why we are where we are and that we are in a better position than most other countries around the world.
PETER STEFANOVIC: Is it right to say that Australia is being saved by the mining sector?
MATHIAS CORMANN: It has been very important to our economic resilience to have the mining sector continue to perform strongly throughout this period. The iron ore price is quite high, export volumes have remained high. There is no question that our economic performance through this period has been underpinned by a continuing strong performance of the mining sector, no question.
PETER STEFANOVIC: We had the Business Council of Australia on our show a little bit earlier in the week and Jennifer Westacott mentioned that she was interested in a broad based investment allowance of 20 per cent covering all forms of investment. Is that something that you are open to in the hope of increasing the amount of jobs by as much as two million jobs moving forward?
MATHIAS CORMANN: Without going into specific measures, certainly we are focused on the sorts of incentives that we can provide to business to invest more, to bring back investment and to ensure they can hire more Australians into the future. We do want to ensure that as we come out of this crisis and as we seek to maximise the strength of our economic and jobs recovery, that we provide confidence and encouragement to businesses to invest, to grow and to hire.
PETER STEFANOVIC: With borrowing costs so low, why not bring forward more shovel ready projects?
MATHIAS CORMANN: We have a very significant infrastructure investment pipeline of about $100 billion over the decade. We are constantly bringing forward whatever we can bring forward. There is a physical limit to how much we can bring forward. But whatever shovel ready projects are out there ready to go, you will find that we are constantly working with State and Territory Governments to see what else we can do sooner.
PETER STEFANOVIC: Let us say that you are not confirm this $850 billion figure, can you give us an indication of how long do you think this is going to take us to pay off?
MATHIAS CORMANN: At the half yearly Budget update before Christmas we were on a trajectory, broadly, to just about eliminate Government net debt at the end of the decade, just about eliminate it over the decade. We have taken a massive hit. We have been forced to spend a lot of money, though nearly 100 per cent of this crisis level support is spent in the two financial years 2019-20, 2020-21. We have preserved the structural integrity of the Budget, but it will take longer now than the next decade to get back on top of this.
PETER STEFANOVIC: Finance Minister Mathias Cormann appreciate your time this morning. Thanks for joining us.
MATHIAS CORMANN: Always good to talk to you.