Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Friday, 25 September 2020
OLIVER PETERSON: The full extent of the economic impact of the coronavirus on the Federal Budget has been revealed today. The deficit will be $83 billion. This is the biggest deficit in Australian history. JobKeeper and the coronavirus supplement which doubled the JobSeeker payment has eclipsed estimates. It will cost almost $58 billion. $58 billion more than forecast. While tax receipts tumbling $33 billion when the economy was shut down due to COVID-19. On the line, live here on 6PR is the Finance Minister Mathias Cormann. Good afternoon.
MATHIAS CORMANN: Good afternoon Oliver. Good afternoon to your listeners.
OLIVER PETERSON: What a huge wrecking ball the coronavirus is to the economy. You were forecasting a $4 billion surplus last financial year. This deficit is going to be a $90 billion reversal. The biggest deficit in Australia’s history.
MATHIAS CORMANN: It certainly is a challenging set of numbers that we are dealing with. But we do know why we are in the position we are in. We do know what has caused this. This is now formalising the economic and fiscal impact of the coronavirus pandemic on our Budget. It is formalising the cost impact of the many fiscal support measures we have had to take to support our health system, support the economy, support businesses, support Australians in jobs and those who lost their job.
OLIVER PETERSON: We will come to some more of those support measures in a moment. But the outlook, what will the books look like even further over the next couple of years, possibly even in the next five years? Any forecasting you can provide us?
MATHIAS CORMANN: What we have delivered today is the Final Budget Outcome for 2019-20. The Budget with the usual forward estimates and medium term projections will be delivered on 6 October. This will be a fiscally challenging period for some time given the size of the impact that this has had on us.
OLIVER PETERSON: As part of the Budget process will there be any indication on how many decades you think it might take to get the Budget back in the black?
MATHIAS CORMANN: We will be providing our usual economic and fiscal forecast and projections. It will give an indication as to what our expectation is in terms of the underlying cash balance and the debt trajectory moving forward.
OLIVER PETERSON: So part of that strategy, stimulus measures that will be put in place that we can expect to hear about on October 6, tax cuts, boosting infrastructure spending. Is that what we can look forward to?
MATHIAS CORMANN: What we have pointed out in the last few days is that our first priority will be to maximise the strength of the economic and jobs recovery. That in itself will help repair the Budget, because as more jobs are created, as fewer people are unemployed, you will collect more revenue on the back of higher income tax collections as more people work and you pay less on income support payments because fewer people need that support in that context. That will be the first wave. Then we need to ensure that we control our expenditure growth moving forward as the economy and the revenue continues to recover. If we were to take any other course of action, if we were to increase the tax burden on the economy in order to repair the Budget faster or pursue excessive austerity measures, that would harm the tentative economic recovery that we are starting to see in many parts of Australia starting to emerge.
OLIVER PETERSON: It is what it is due to the coronavirus, but as you are also preparing to exit federal politics Mathias Cormann, when you reflect on this year, can you believe the situation the entire world is in right now?
MATHIAS CORMANN: I have very much lived it since the middle of January. It clearly was an unexpected one-in-100-years crisis event with massive implications all around the world, including here in Australia. In Australia, I have to say, we went into this crisis in a position of comparative economic and fiscal strength. We have gone through this crisis in a comparatively better position than most other countries in the world, both from a health and from an economic and fiscal point of view. But that does not mean that it has not been hard. It has been and it will continue to be hard for some time. Looking at what is happening all around the world, I would have thought you would still rather be in Australia than anywhere else in the world.
OLIVER PETERSON: We would all agree with that. JobKeeper, JobSeeker, they are about to change as well. Are you happy with the progress to date and you are happy that the changes will be made and implemented next week?
MATHIAS CORMANN: Yes. JobKeeper, a $1,500 wage subsidy per fortnight was a temporary crisis support measure for the initial six month period. We have extended that at a lower rate, on a phasing down basis for another six months. The JobSeeker payments were effectively doubled for the initial six months. We are also starting to phase that down, though extending it by three months. In the end, as the economy continues to recover, as businesses continue to recover, we have to get back into a situation where businesses pay for the wages of their employees out of their income, rather than for the taxpayer to pick up the tab. What we are doing as of next week when it comes to JobKeeper is that businesses as they recover are expected to pay an increasing share of the wages of their employees as we continue to go back towards a business as usual situation.
OLIVER PETERSON: You and the Treasurer announced today there will be some lending reforms. So how are you making it easier for Australians to take out a home loan or sign up to a new credit card?
MATHIAS CORMANN: What has happened over the last ten years or so is that the regulatory burden has made accessing loans too costly, too complex for many Australians, who are quite readily able to afford to take out a loan in order to buy a new home or to invest in their small business. What we are doing is removing the so called responsible lending obligations for all lending, except for small account credit contracts and for consumer leases, where there is a need for stronger consumer protection to remain in place. But what has been happening is that the banks have been taking too much of a risk adverse, conservative approach, which has meant that too many Australians were finding it difficult to access finance even though they were perfectly able to deal with the obligations and commitments that came with taking out a loan. As we want to maximise the strength of the economic recovery, appropriate flow of credit into the economy and into business is going to be a very important part of that equation. That is why this reform has been announced today.
OLIVER PETERSON: A lot of consumer advocates are a little worried that this will enable Australians to take on more debt, but there will be fewer protections. What would you say Minister? Even Choice has described that this could become a disaster.
MATHIAS CORMANN: I disagree with that assessment. When it comes to regulation, it is always a matter of making sure that things are appropriately balanced. Yes, there have to be appropriate levels of consumer protection in place, in particular for those more vulnerable consumers, but we also have to take individual responsibility. We have to encourage individual responsibility in terms of individual decision making. This is really seeking to restore a better balance into regulatory arrangements, to reduce the cost of taking out a loan and to make it easier in appropriate circumstances for people to take out a loan to buy a new home or to invest in their business.
OLIVER PETERSON: Will there be any extension of the HomeBuilder scheme?
MATHIAS CORMANN: The Budget will be delivered on 6 October. I commend that to you. I am happy to come and talk to you in the context of the Budget.
OLIVER PETERSON: Alright, we look forward to that. Are you removing ADF personnel from the State border because you want the State border to come down?
MATHIAS CORMANN: No. State border closures are a matter for the States. The State Premiers, including the Premier in Western Australia and the Federal Leader of the Labor party have pointed out to the Commonwealth on a number of occasions now that they wanted us to prioritise support for quarantine arrangements. We want to ensure that more Australians are able to find their way back home from overseas. We want to see more West Australians being able to come home from overseas where they want to. So we will be prioritising ADF support for the necessary quarantine arrangements to ensure that can happen.
OLIVER PETERSON: The situation is rapidly improving in the Eastern States. Would you encourage the McGowan Government to bring forward, at least that health advice that is slated for October 28 to go to stage five?
MATHIAS CORMANN: I have consistently been on the record to say that where other States are in the same or a better position as Western Australia, I really believe that we need to consider whether there is the opportunity here to open borders towards those jurisdictions. If you have States, in particular, I am thinking Tasmania, the Northern Territory, South Australia and the ACT, where you consistently had zero community transmissions, zero locally acquired transmissions for months on end, it is very hard to see how the inconvenience for families and the inconvenience for business and the impact on jobs can be justified when there is no discernable risk. In relation to jurisdictions that are in the same or a better position, I would certainly continue to encourage the Premier to at least explain to the West Australian community what the pathway out is. If zero cases is not good enough, what is good enough to let the situation go back to normal?
OLIVER PETERSON: Well we beg this answer because next week, October 1, the Queensland Government has announced they will have a 75 per cent capacity at the stadium in that State. We will have a final next week when the Eagles knock Collingwood out of the AFL. We can only have 58 per cent capacity at Optus Stadium. It seems as though everything is not adding up all of sudden Minister.
MATHIAS CORMANN: My view is clearly it is appropriate for us to take all of the necessary measures to minimise risk. But once we have taken the measures to minimise risk to manage risk of further outbreaks or new infections, we also have to look for opportunities to increase and maximise the level of activity in a way that is COVID-safe. The virus is going to be with us for a long time, potentially, as a threat. We have to ensure that we give ourselves the best possible tools, in the same way as the New South Wales Government is doing, to manage the risk, but to also to ensure that life can be as close to normal as possible. That should include having more people being able to watch the Eagles smash the Pies.
OLIVER PETERSON: Good on you Mathias Cormann, have a good weekend.
MATHIAS CORMANN: Always good to talk to you.