Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Wednesday, 7 October 2020
HAIDI STROUD WATTS: Well let’s get to the aftermath of the Australian Budget, tax cuts for millions of Aussies, a plan to boost employment for young people and major asset right offs for nearly all businesses. Headlining that delayed Budget that was delivered last night, it is also the seventh and final Budget for the country’s longest serving Finance Minister Mathias Cormann, he joins us now from Canberra this morning. Minister wonderful to have you on Bloomberg TV as always.
MATHIAS CORMANN: Good to be here.
HAIDI STROUD WATTS: Let me ask you this question, $98 billion worth of policies in this Budget package, we have heard from everyone from the Fed to the RBA to the IMF pretty much everyone calling for the kitchen sink to be thrown at this once in a lifetime crisis. Is this a sense of caution in the Budget, could more have been done?
MATHIAS CORMANN: We are doing as much as we think is required. We are providing very substantial, in fact historically unprecedented, fiscal support into the economy supporting businesses, supporting jobs, supporting those Australians who lost their job as a result of this COVID recession through no fault of their own. Now to support the strongest possible economic and jobs recovery, we presented last night our plan to get Australia out of this COVID recession and to get Australians back in to work.
HAIDI STROUD WATTS: So, one of the problems of course, these tax cuts are one of the centrepieces of the Budget, they have been moved forward. But the criticism overwhelming is that they address these middle to high income earners, we know that is not where the spending is going to be, so should it have been more targeted towards the other part of the demographic and would, say a temporary halt to the GST have been more effective in getting domestic consumption up?
MATHIAS CORMANN: Well firstly they do not favour middle to high income earners. They are very much targeted at low and middle income earners. Our expectation certainly is that that segment of the population will spend most of that additional money in their pockets which will help boost aggregate demand across the economy. But it is only one of a whole series of measures. One of our biggest fiscal support measures is giving the opportunity on a time limited basis until the end of June 2022 for businesses to fully deduct the cost of any investment they make to invest in their future growth and success. By making it a time limited opportunity for any business with a turnover up to $5 billion, it provides the encouragement for businesses to make that decision to invest now rather than to invest later, and we do know that a growing business that is investing in their future will hire more Australians again and that is what the objective is of this exercise.
SHERY AHN: There is also criticism that perhaps this is just a mix of old ideas, tax cuts, wage subsidies, business tax breaks, at a time when the economy was slowing even before the pandemic. So how does this Budget address those issues?
MATHIAS CORMANN: Well our economy was in very good shape before this pandemic. Our economy continued to grow at a time where economies in other parts of the world were struggling. We were into our 29th year of continuous growth. So the fundamentals in the Australian economy remain strong. We have been pursuing a pro-growth, pro-opportunity agenda for some time, including by pursuing a very ambitious free trade agenda to give our exporting businesses the best possible access to key markets all around the world, lifting the proportion of our trade that is subject to free trade agreements from 26 to 70 per cent and we are working to boost that further. We continue to be in the part of the world, the Asia Pacific where most of the global economic growth will be generated for decades to come. We were all hit by an unexpected crisis event. We all know why we are in the position we are in. But the fundamentals are strong, we just have to get all of that incentive out to ensure that businesses get themselves back onto that right trajectory.
SHERY AHN: Should there have been special consideration for perhaps those sectors that may not recover as fast especially given that international tourism really isn’t going to be up and running properly any time before 2022?
MATHIAS CORMANN: Look we are providing supports into the economy on an economy wide basis. We are not picking winners specifically, but there are special supports for those sectors of the economy that are more severely impacted, like the aviation sector and the tourism sector in particular. But by and large, what we are seeking to do here is to provide incentives on a sector neutral basis so that in the free market individual businesses operating in the free market looking for those opportunities to grow and to prosper in this new environment are encouraged to do the best they can to get ahead. We do know that the principles of the free market continue to be the best recipe to lift living standards and to maximise opportunities for individual people to get ahead, for their families to get ahead and indeed for the communities they live in to get ahead.
HAIDI STROUD WATTS: Minister the Budget still obviously shows a lot of labour market slack, with unemployment at 5.5 per cent come 2024. The RBA reiterated how boosting national employment needs to be a priority. But the problem is if you take a look at the out years for this Budget, the level of Government spending falls quite dramatically, so how do you expect to get domestic consumption, unemployment and wage growth going when it seems not particularly possible to maintain this level of spending?
MATHIAS CORMANN: Jobs before this crisis and when we get beyond this crisis will overwhelmingly be created by successful profitable private sector businesses. Before we went into this crisis nine out of 10 jobs in the Australian economy were created by private sector businesses. That is the situation we need to get back to. We cannot maintain a situation where Government and tax payers continue to spend at this crisis level. We were very focused on providing significant support, but making sure that that support was temporary, was targeted and did not bake in structural burdens into the Budget bottom line. That is an important feature in making sure that we are in the best possible position to deal with any future economic shocks that might come our way. In the end its businesses, private sector businesses that have to lead Australia out of this COVID recession and that have to create the jobs that our economy needs to get ourselves back in the strongest possible position moving forward.
SHERY AHN: Given how there seems to be a little bit of caution in the Budget according to people who have looked through the numbers. Is this a subtle way of pushing the burden on the RBA, which of course held yesterday trying to give as much space for fiscal policy. Is this a way of asking to RBA to do more?
MATHIAS CORMANN: Well I have to say I do not know where you see caution when we are increasing spending this financial year by a historically unprecedented 22.6 per cent above inflation. When we are going along with a deficit this financial year of 11 per cent as a share of GDP, which in an Australian context was completely unthinkable prior to this crisis. So we are doing what we need to do within reason to provide all of the necessary and appropriate fiscal support into the economy. The RBA will make its judgements independently as they must, in terms of what the appropriate monetary policy settings are going to be, that is a matter for them. But we have made the judgements that we believe are right for this time to guide Australia out of this COVID recession as swiftly as possible into the strongest possible recovery moving forward.
HAIDI STROUD WATTS: Minister we know that you have plans to leave politics by Christmas after the December Budget update. Tell me are you putting your hat in the room for the OECD role?
MATHIAS CORMANN: Look I am focused on selling our Budget today. There will be an appropriate time to make these sorts of decisions and depending on that, make relevant announcements. I will turn my mind to that at the appropriate time.
HAIDI STROUD WATTS: Is it a role that would interest you, hypothetically of course?
MATHIAS CORMANN: I have a very important rule not to make commentary on hypothetical scenarios, so I will turn my mind to this or any other opportunity for after I have left this job, at the appropriate time.
SHERY AHN: You can’t blame us for trying right? Finance Minister Mathias Cormann thank you very much for joining us.