Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Monday, 5 October 2020
FRAN KELLY: Well Finance Minister Mathias Cormann has had a big hand in preparing this Budget, in fact preparing the last seven Budgets. He is in our Parliament House studios, Mathias Cormann welcome back to Breakfast.
MATHIAS CORMANN: Good morning Fran.
FRAN KELLY: How bad will tomorrow’s numbers be? Is there still room to be shocked by the state of this Budget?
MATHIAS CORMANN: The numbers will be bad objectively, but we know why we are here. We were hit by an unexpected coronavirus pandemic, which has had a very severe impact on our economy. We made decisions to boost our health system, to cushion the blow in the economy, to support business, to support jobs, to support those Australians who lost their job as a result of this pandemic through no fault of their own. All of that comes at a cost and that has been reflected in the updates that we have provided in recent months and it will be reflected in the numbers tomorrow.
FRAN KELLY: We have had years of scare campaigns from you and others in the Coalition around debt and deficit. Do you now concede its time to spend whatever it takes?
MATHIAS CORMANN: We inherited a weakening economy, rising unemployment and a rapidly deteriorating Budget position. As a result of the work that we did in our first six Budgets, we entered this crisis, a real crisis, in a comparatively stronger position. To put the coronavirus pandemic into perspective compared to the global financial crisis, the impact on global growth from the global financial crisis was a 0.1 per cent contraction in the global economy. The impact of the coronavirus pandemic is a 4.5 per cent contraction in the global economy. This is a…interrupted
FRAN KELLY: Yes but the remedy in response was basically the same, which is to spend, to stimulate wasn’t it?
MATHIAS CORMANN: We did not go out and put pink bats into people’s roofs in order to take them out again because they put houses on fire. We did not put money into overpriced school halls that schools had not asked for. We have focused on providing genuine and important support to Australians, keeping as many Australians in jobs as possible, to support those Australians who lost their job through boosted income support payments. Indeed, we are focusing now, having cushioned the blow, having saved as many jobs as we could, we are focused on the recovery, we are focussing on restoring as many jobs as we can and to ensure that as many new jobs as possible are created by successful, viable, profitable businesses around Australia who are confident about their future.
FRAN KELLY: I will come to some of the measures in a moment, but we have learnt this morning that the Budget is predicated on an assumption of an effective vaccine being available next year. When are you assuming the vaccine will be available?
MATHIAS CORMANN: All of the specifics will be released tomorrow. As we always do, Budget assumptions are based on the best available advice and information at a particular point in time. Clearly there are indications about what the expected timetable is going to be and that will be appropriately factored in to the Budget settings.
FRAN KELLY: It is impossible to know I suppose really, but do the assumptions factor in how quickly most Australians will receive the vaccine if they want it and how effective that vaccine is?
MATHIAS CORMANN: In the end, estimates are always that, they are estimates. They are based on the best available information and predictions about future events at any one point in time. Estimates get improved as better information becomes available. We have a track record of making prudent, conservative, cautious assumptions. Just to give you the example of the iron ore price, we have been assuming in Budget update after Budget update that the price of iron ore would be going down to $55 a tonne, it is still currently running at about $110 a tonne. That is just one example. We are very, very cautious. This is a rapidly evolving situation. There is a lot of uncertainty and you have to make the best possible judgements in terms of what you expect to happen in the future based on the information in front of you.
FRAN KELLY: The Prime Minister says this Budget is all about jobs. How many jobs will this Budget create?
MATHIAS CORMANN: The Budget will be delivered tomorrow. We are focused on saving as many jobs as possible, restoring as many jobs as possible that were lost and creating as many new jobs as possible…interrupted
FRAN KELLY: How do we mark though success, will you have a benchmark of success?
MATHIAS CORMANN: Of course. We always have a benchmark of success. In the Budget papers we publish our expected employment growth rate and we deliver a Final Budget Outcome. If you look at our Final Budget Outcomes for 2016-17, 2017-18, 2018-19, we consistently outperformed employment growth when we delivered the actual Final Budget Outcome compared to the forecast at Budget time, which is why in those Budgets, our Final Budget Outcome, the underlying cash balance was better, materially better, than what was anticipated at Budget time.
FRAN KELLY: So what will the forecast be for jobs this time?
MATHIAS CORMANN: I will let the Treasurer deliver the Budget tomorrow night at 7:30pm.
FRAN KELLY: The Government will spend $1.2 billion we know to pay half the wages of 100,000 new apprentices or trainees, pay that for a year. Will this model of wage subsidy be extended, will we hear this tomorrow night that it will be extended to other sectors, maybe tourism or hospitality?
MATHIAS CORMANN: The Budget will be delivered tomorrow, but in relation to apprentices, that is a very exciting and very important measure. Any business that is considering putting on a new apprentice as of today, from 5 October, until the end of September next year, in any sector, whatever their income, whatever their area of activity, they will be able to receive a 50 per cent wage subsidy, helping to defray the cost of taking on that apprentice. That is…interrupted
FRAN KELLY: Is it a model that can be extended across the economy in your view?
MATHIAS CORMANN: What we are doing, we have announced the measure for apprentices and it is going to be available for up to 100,000 new apprentices. In terms of what other measures we might be having in the Budget tomorrow, I will leave that to the Budget.
FRAN KELLY: New analysis from the ANU Centre for Social Research shows that scaling back both JobKeeper and JobSeeker last month will lift the poverty rate to 15.7 per cent that is up on the 14 per cent of Australians who were living in poverty before the pandemic. That number will go even higher when the coronavirus supplement paid to people on JobSeeker ends on December 31. It is clearly causing a lot of people a lot of anxiety. When will you tell people the new rate of JobSeeker and why wouldn’t that be tomorrow night?
MATHIAS CORMANN: The rate of JobSeeker continues to be substantially higher than what it was before we want into this pandemic…interrupted
FRAN KELLY: Only to December 31.
MATHIAS CORMANN: … and we have also lifted the amount of money people on JobSeeker are able to earn before they lose any of their JobSeeker support payments. In fact, instead of being able to earn $105 a fortnight, they can now earn $300 a fortnight on top of their JobSeeker payments. What we have said is that we would continue to assess the developments in the economy…interrupted
FRAN KELLY: Will we get that tomorrow night?
MATHIAS CORMANN: We have already said that the ongoing arrangements in relation to JobSeeker payments will be announced later this year. We will be making those decisions after we have had the opportunity to further assess how the economy recovers and how many people and to what extent people are able to get back into work.
FRAN KELLY: So that is a no, not tomorrow night?
MATHIAS CORMANN: I have been quite clear about that.
FRAN KELLY: The Budget will pull forward tax cuts that have already been legislated, stage two at least we expect to be backdated to July 1 this year. If so, when will people see the benefit of that? Will they have to wait until their tax return next July, which will be a long time to wait for stimulus? When will they start to see that in their pay packets?
MATHIAS CORMANN: Again, I will let the Budget be delivered tomorrow, but you are quite right, we have a track record of putting more money into worker’s pockets, making sure that people have increases in take home pay as a result of lower income taxes. That has been our track record. As we have indicated, that was one of the things that we have been focused on in the context of this Budget. If there is a measure to bring forward some income tax cuts and they are supported by both sides of politics, they are legislated or they are at least supported, then the ATO would be able to pass that on very quickly.
FRAN KELLY: On another issue the Budget will confirm that Australia has suffered the first negative migration since 1946. More people will leave the country this year and next than will arrive. Migration accounts for 60 per cent of population growth, so this will obviously have significant consequences for the economy. Once the borders reopen, will the Federal Government increase the annual intake of migration to try and make up the shortfall?
MATHIAS CORMANN: You are now asking me to pre-empt what might happen at some point in the future, in a circumstance…interrupted
FRAN KELLY: Well presumably we are planning for this?
MATHIAS CORMANN: We are planning for the strongest possible economic recovery and right now what you are talking about is not just something that causes certain economic outcomes, it is something that is a direct consequence of where the economy is at. Clearly there are severe restrictions in terms of international movements, there is significantly lower demand than there might have been in the past in relation to skilled migrants coming into Australia in particular. We would expect that to recover as the economy recovers and we would expect it to go back to a more normal pattern once we are on the other side of this pandemic.
FRAN KELLY: Given the hit on intake though, isn’t it reason enough to release people like the Biloela family, for instance out of detention, let them contribute to our economy as they were before they were detained. Why wouldn’t we do that now?
MATHIAS CORMANN: I think you are mixing different issues here. I will let...interrupted
FRAN KELLY: Why?
MATHIAS CORMANN: They are quite unrelated. There are specific circumstances here and I will leave it to Peter Dutton to comment about specific cases in relation to people who have gone through a legal process around their rights and ability to stay here.
FRAN KELLY: Just finally, your home state WA is likely to reveal a Budget surplus when the State Budget is released this week. Is it irresponsible with the Federal Government spending as it is for any State to be delivering a surplus right now?
MATHIAS CORMANN: At a moment of crisis like this, and this is one in a hundred year crisis event, where a lot of businesses and a lot of people are suffering, it is the responsibility of Government to step up, to support business, to support the economy, to support jobs. I certainly think that across the country, at all levels of Government we all need to do what we can to ensure everyone has the best possible opportunity to get safely to the other side.
FRAN KELLY: Mathias Cormann thank you very much for joining us.
MATHIAS CORMANN Always good to talk to you.