Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Tuesday, 6 October 2020
PAUL MURRAY: Let us get to the Finance Minister who has got a million people to talk to and has very kindly given us a moment of his time here. Firstly Senator, nice to see you, nice to see you Minister.
MATHIAS CORMANN: Good to see you too.
PAUL MURRAY: Let’s react directly to what you just heard from your colleague in the Senate there, in Kimberly Kitching, that basically house of cards assumptions if vaccines don’t happen, if borders don’t happen, then all of this falls over.
MATHIAS CORMANN: Paul, I think that all reasonable Australians understand why we are in the position we are in. They know that we have been hit with a global pandemic which has hit economies around the world hard, which has hit our economy hard, which also as a consequence has hit our receipts and forced us to increase payments, even before we have made any decisions as a function of more people losing their jobs. We have been hit with a coronavirus recession, which had a negative impact on our tax receipts, which has forced us to increase welfare payments. We had to make many decisions, costing a lot of money, to support the economy, to support business, to support jobs, to support Australians who lost their jobs and now to maximise the strength of the recovery. We have cushioned the blow. We have been working on the recovery. The Budget tonight is presenting our plan to get Australia out of the COVID recession, to maximise the strength of the recovery. It is a plan for jobs. Now, jobs do not grow on trees. Jobs are created by viable, profitable, successful businesses. That is why this Budget is very much geared around providing the support and the incentive and the encouragement and the confidence that businesses need to invest. Because a growing business, a successful, growing, profitable businesses will hire more Australians into the future. That is not just important for the economy, as much as it is, it is clearly important to create opportunity for Australians to get ahead. But it is also important for our Budget, because as we get more Australians back into work, they pay income tax and fewer Australians end up relying on welfare payments. Just on the question of assumptions, every Budget has assumptions. Budget estimates are estimates. They are not actuals. In the year that we have just gone through, it has been a rapidly evolving situation. There is more than your average level of uncertainty. So you have to make judgements on your estimates based on the best available information and advice. That is what we have done. You know what else we have done? We have put those assumptions in lights, into the Budget so that everybody can see what they are. The most realistic advice we have received is that it is likely that we will have a vaccine, a COVID vaccine available for mass distribution in Australia by the end of 2021. That is what is reflected in the Budget. Now, who knows, if it is sooner we will have a positive change. If it is later, we will have to book a negative change. That always happens between Budgets and Budget updates. That is why we have updates because you do not have perfect information. You can only ever act on the best available information. As better information becomes available, you improve your estimates until you get to the actual outcome in the end.
PAUL MURRAY: Alright, now what is your advice to the 11 million people who are going to get a tax cut about what they should do with that extra money?
MATHIAS CORMANN: Let me tell you, I am really proud that more than 11 million working Australians will end up with more money in their pocket, more of their own hard earned money in their pocket. I am the Government. It is not for me to decide what they do with that money. I suspect that many of them will spend it. That is great. That will be good for aggregate demand in the economy which will help us strengthen the economy. But there is nothing wrong with people choosing to save their money either. I hear some of those very strange arguments which seem to imply that there is a problem when people choose, with their own money, to put some of it away for a rainy day. Because in the end if an individual Australian decides based on their own circumstances, that it is in their interest to put some money aside, that improves their financial position and their sense of financial security for the future, that in itself will help to boost confidence and boost growth and opportunity over time. In the end, this is more money in workers pockets. We expect it to boost aggregate demand and be good for the economy. But whatever individual Australians decide to do with their own money, that is entirely a matter for them.
PAUL MURRAY: Alight, now I am going to put something on the screen, might look like an awful lot of numbers to people. But I am going to read it through because I know you don’t have return vision there, which is about the income for the Government over the next few years okay? Now, total receipts and income, actual from 2019-20 was $469 billion. It falls this year to $463 billion. It falls next year to $451 billion before going back up and up. Now, it would be off this Budget that you expect company tax to go backwards twice before it goes forward. But the GST keeps going forward. So put simply, do you expect that companies get weaker in the next couple of years, but the economy is okay because more people spend the money they are getting?
MATHIAS CORMANN: A couple of points here. You have put your finger on something here. Firstly, the biggest impact on the Budget bottom line is a fall in receipts. Even without us having made any policy decision whatsoever, just based on parameter variations, which is the impact of the COVID recession on the economy, we are losing about $227 billion worth of tax receipts over the forward estimates period. Which is a huge amount. Given that you have put that table on your screen, what I would encourage you to do is to get your producer to look at Budget Paper 1, page 3-30. What that shows is the payment trajectory over the forward estimates period and the medium term. And what you will be able to see is that when it comes to the payment side of the equation, there is an increase, a temporary increase, like a little mountain. Then the payment trajectory goes back to what it was expected to be pretty well in the 2019-20 Mid-Year Economic and Fiscal Outlook. That is before the crisis. So we have not baked in structural payment burdens into this Budget. We are providing temporary targeted support on the payment side. But the economy will now over the entire forward estimates and medium term period will be smaller than it was expected to be before this crisis. Even though the economy is expected to grow again, it will continue to be a smaller economy than it otherwise would have been, which means that the revenue side of the equation is going to be less than it was expected to be for an extended period. So the challenge really is to let revenue recover as the economy continues to recover moving forward, while controlling the payment growth at the same time.
PAUL MURRAY: Alright Minister, thank you. Thank you for your hard work to this point. Thank you for getting the country to the point that you have so that we are able to make the decisions which I am sure will fun when reversing a bit of philosophy here but we will talk to the Prime Minister here tomorrow. But thanks for talking to us tonight.
MATHIAS CORMANN: Thank you so much Paul.