Transcripts → 2020



Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia


Date: Friday, 25 September 2020

Consumer credit reforms, Economic supports

KIRSTEN AITKEN: Patricia Karvelas spoke to the Finance Minister Mathias Cormann a little earlier.

MATHIAS CORMANN: What has happened over the last decade or so, is that the lending arrangements have become too costly and too complex. People who quite comfortably could afford to take out a loan to buy a house or to invest in their business were finding it difficult or too costly to do so because of ever increasing regulatory burdens. So what we are seeking to do here is to restore some of that balance.

PATRICIA KARVELAS: These changes replace the current practice of lender beware with a borrower responsibility principle. What does that mean in practical terms?

MATHIAS CORMANN: In practical terms, most Australians are perfectly capable of taking individual and personal responsibility for their decisions and for their judgements. Those Australians should be able to pursue loans that they are able to afford. Businesses and small businesses in particular should be able to pursue loan applications where they are perfectly able to handle those loan commitments, without the need for excessive and overly burdensome and complex regulatory compliance arrangements. For those Australians that find themselves in a more vulnerable position, or those consumers that find themselves in a more vulnerable position need to continue to have the protection of the appropriately stringent consumer protection arrangements. That is why these responsible lending obligations remain in place, in relation to small account credit contracts and in the context of consumer leases and the like. But for most Australians, what we have found and the feedback that we have been getting consistently, is that the banks have become excessively risk averse and too conservative in the context of what they perceive to be their obligations under an increasingly bureaucratic regime.

PATRICIA KARVELAS: How can you have confidence the banks will do the right thing when Westpac has literally just been handed the largest fine in Australian corporate history, for twenty-three million breaches of anti-money laundering laws. Doesn’t it just demonstrate that the banks can’t be fully trusted?

MATHIAS CORMANN: That was not in relation to lending standards …interrupted

PATRICIA KARVELAS: No, but it shows a pattern of behaviour doesn’t it?

MATHIAS CORMANN: What it shows was a serious failure of risk management. That is why Westpac is paying the price for that as a result of our regulatory arrangements and compliance arrangements doing what they are meant to do. Westpac clearly had the full force of the law and regulatory arrangements thrown at it. They are paying the price for that. We want to maximise the strength of the economic and jobs recovery on the other side of this pandemic. Appropriate access to credit for individual Australians and for small and medium sized businesses in particular is going to be an important part of that equation. Right now, it is too difficult, too costly, too complex for too many Australians who are perfectly capable of handling these loan commitments, it is too complex, too costly for them to get access.

PATRICIA KARVELAS: Why was the decision made to remove ASIC as the body responsible for enforcing the responsible lending rules?

MATHIAS CORMANN: There is a level of double up here, because APRA is clearly the prudential regulator. APRA sets prudential standards for the banks. APRA as a supervisor for the banking system also has certain requirements in place in terms of reasonable enquiries to ensure the banks satisfy themselves that loans are provided in appropriate circumstances. This is making sure that we ease the regulatory burden where that is sensible for that to be done. 

PATRICIA KARVELAS: Haven’t we learnt the historical lessons though Minister, that if you make it this easy and free, mistakes are inevitably going to happen? You actually might put people at significant financial risk. Isn’t that an inevitability of loosening up like this?

MATHIAS CORMANN: We have more confidence in the Australian people. We trust individual Australians to be able to make judgements about what is in their best interest. There are  ...interrupted 

PATRICIA KARVELAS: Okay, but if you look at history, I don’t mean to be rude. Okay, of course we all want to trust everyone, that is the sort of utopian model, but if you look at actually human behaviour and the way these things work, people will put themselves at risk. Isn’t that why you need to have a robust system that ensures that doesn’t happen?

MATHIAS CORMANN: I totally reject the proposition that you have just put …interrupted


MATHIAS CORMANN: ...that individual responsibility is a utopian model. Individual responsibility has got to be the foundation of a strong, resilient and successful society …interrupted

PATRICIA KARVELAS: But then you wouldn’t have any regulation if you thought the individual could sort it all out always.

MATHIAS CORMANN: It is a matter of balance. I am not arguing for no regulation. It is a matter of balance. To be frank, regulatory arrangements when it comes to access to finance got out of balance. The level of regulatory burden had become too high. The access to loans, in particular and including by Australians and businesses that are perfectly capable of handling certain loans to buy a home or to invest in their business was becoming too difficult, too complex and too costly. We are seeking to reduce that cost burden on the community, on individual Australians and on business.

PATRICIA KARVELAS: Is it still within the spirit of the Royal Commission’s findings?

MATHIAS CORMANN: This is in the spirit of wanting to strengthen our economy moving forward. Creating opportunity for Australians to get ahead, making sure that we have the strongest possible economic and jobs recovery on the other side of this pandemic.

PATRICIA KARVELAS: And what will the Government’s benchmark be for success? How will you be monitoring where this becomes a potential problem? I mean experts, people have broken big stories in this area, people like Adele Ferguson are warning that this is the sort of change that might lead to financial disaster for some people.

MATHIAS CORMANN: As always, we will monitor the way these reforms land in the economy, in the community. Our expectation is that this will be an overwhelmingly positive change. It will rebalance the level of regulatory overreach that has been creeping in, in recent times. It will empower individual Australians. It will give them the capacity to access finance in circumstances where they should be able to do so at a lower cost than is currently the case.

PATRICIA KARVELAS: The JobSeeker payment will drop by $300 from today. Are you worried about the impact of taking that money out of the economy?

MATHIAS CORMANN: The JobSeeker payment is still $250 a fortnight higher than it was prior to this pandemic. It was always clear that the six month support through the enhanced JobSeeker arrangement, where we effectively doubled the level of JobSeeker payment, was temporary. We have extended it at a lower level for another three months until the end of December. We have also lifted the amount of money individual Australians on JobSeeker are able to earn before they lose any of their JobSeeker support from $105 to $300 a fortnight. So people are able to earn more, while still keeping that enhanced JobSeeker support. We believe that we have the right balance here. The feedback that we have been getting increasingly from business is that they are finding it, at a time of comparatively higher unemployment, increasingly difficult to get new workers because too many, perhaps, are finding it more attractive to continue to rely on the highly elevated JobSeeker payment rather than to accept some of the jobs that have been put on offer.

PATRICIA KARVELAS: So if that is the case, let us say in somewhere like Perth, that can’t be the case somewhere like in Victoria where there has been a forced shutdown right?

MATHIAS CORMANN: Again, this was a six month temporary transitional support measure. It was historically unprecedented. We doubled, we doubled the level of JobSeeker support. We believe it is appropriate for this to be phased down. The economy has been overwhelmingly recovering, except in Victoria where JobKeeper will continue to be accessed at a much higher rate than elsewhere in the country because businesses there are likely to need that support for longer and there are other supports that are available as well. 

PATRICIA KARVELAS: This is your last Budget, so given that, do you think that there should be a corporate tax cut? What is your view on that?

MATHIAS CORMANN: My view is that we, as an open trading economy, as a capital importing economy, an economy that relies on foreign investment to maximise our economic opportunities and the opportunities for individual Australians to get a job, to pursue a career and to get ahead, that we need to ensure that our tax policy settings are internationally competitive. In that context, we have already flagged that we always should consider how we can best incentivise and give confidence to business to invest in their future growth and success because a business that grows, that is profitable, that is viable will hire more Australians. That is the point. We want businesses to hire more Australians so that more Australians are paying income tax to the Government.

PATRICIA KARVELAS: I think everyone agrees that we want more business to hire more Australians, it is about how they do it right? So do you think that if they were to pay a lower corporate tax cut that they would do that?

MATHIAS CORMANN: I am not going to go through individual measures in the Budget. But what I am saying to you is we are certainly very focused on making sure that the tax policy settings are right. That the incentives for business are there to invest in their future growth and success because we know that a growing and successful business will hire more Australians. That is what the Australian economy needs right now. 

PATRICIA KARVELAS: Just finally Mathias Cormann, a lot has been written about the potential announcement of a kind of wage subsidy scheme in the Budget. Is there anything you can tell me about how you think a program like that might work or might be successful?

MATHIAS CORMANN: The Budget will be delivered on 6 October 2020 at 7:30pm. I commend it to you …interrupted

PATRICIA KARVELAS: I know I have written down the date, but as a concept, what do you think? I mean we have seen international examples, announcements in the UK, other countries of these kinds of schemes, the sort of next phase after JobKeeper. What are the kind of benchmarks for success for you?

MATHIAS CORMANN: Patricia, as I have told you over the last seven years, we have known each other for a long time. I am a part of the decision makers. I am not a commentator. I am very happy to talk to you about what it is we have decided to do when the Budget is delivered on 6 October at 7:30pm by the Treasurer. Up until that time I am going to leave the Budget speculation to good people like you and other commentators around the place.

PATRICIA KARVELAS: Okay, people will continue to speculate. How far under six per cent do you think the jobless rate should have to be before the Government starts focusing on repaying debt?

MATHIAS CORMANN: I think there has been a level of misinterpretation here. Budget repair is not something that will wait until the jobless rate is below six per cent or the economy has recovered to a certain level. What we have said, what the Treasurer has said, is that our priority in a first phase will be on the economic and jobs recovery. The economic and jobs recovery in itself will help to repair the Budget because as more jobs are created, as the economy grows more strongly, more revenue will be generated as more people get into work and payments will go down as fewer Australians will have to rely on income support through the welfare system. So that first phase is very much also a first phase of Budget repair. What we have said is that as we are looking to maximise the strength of the recovery, what we will not be doing, we will not be repairing the Budget on the back of a higher tax burden on the economy or based on excessive austerity. What we will be doing is pursuing a growth agenda, which will lead to more Government revenue as well as lower payments on welfare, at the same time as over time, as appropriate to control expenditure growth moving forward.

KRISTEN AITKEN: Mathias Cormann speaking to Patricia Karvelas there.