Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Wednesday, 7 October 2020
PETER STEFANOVIC: Welcome back to First Edition, live here from Parliament House in Canberra. It is 6:30am, where we are covering all the details from last night’s historic Budget reveal and joining me live now is Finance Minister Mathias Cormann. Minister good to see you face to face, finally.
MATHIAS CORMANN: Good to be here.
PETER STEFANOVIC: A lot of incentives for workers under the age of 35, the Opposition already critical of that. Does this disincentive people who are over the age of 35.
MATHIAS CORMANN: No. All Australians of all ages want to get Australia out of this recession and this Budget is our plan to get Australia out of the COVID recession. We had a very challenging year. We were hit with an unexpected global pandemic, which has had a devastating impact on our economy, on jobs. We cushioned the blow through our initial significant fiscal support measures and of course since then we have worked on the recovery. This Budget is our plan to maximise the strength of our economic and jobs recovery for all Australians. There are particular challenges faced by young Australians who disproportionately were impacted by the jobs effect of this coronavirus pandemic, which is why there are specific measures to ensure that young Australians are not left behind. In previous recessions, in previous economic downturns, one of the big features was that if young people lost touch with the labour market and stayed on unemployment benefits over too long a period, it became harder and harder to get them back into the workforce. So that is why there are specific measures targeting and providing support to young people. It is quite disappointing to hear that the Opposition Leader is not supportive of that particular and specific support for young Australians.
PETER STEFANOVIC: Why did you rest on 35?
MATHIAS CORMANN: I have just indicated…interrupted
PETER STEFANOVIC: But why that age?
MATHIAS CORMANN: Well because that is what the data indicates, that people in that age bracket between 16-35, obviously worse at the younger age, got most impact. The older Australians get the less, proportionately speaking, the impact has been. There is a clear challenge at the younger end. Younger Australians, those that had only just come into the labour market or were about to come into the labour market were very, very heavily impacted by the economic impact of the coronavirus pandemic and that is why there is this particular focus on providing support to them and providing support to business to hire more younger Australians.
PETER STEFANOVIC: But what is going to happen to older Australians here? Are they going to miss out? The point is there is incentives for businesses to employ younger Australians, but what happens to the older Australians here? It is going to cost a lot of money to train them.
MATHIAS CORMANN: This is the whole point. Older Australians will benefit from the strong economic and jobs recovery that will come. About a million jobs will be supported through this plan that we have released yesterday. The economy is already recovering, jobs are already being restored and older Australians compared to younger Australians are already quite a number of steps ahead. There is lots of support in terms of reskilling and retraining opportunities that are available to all Australians, irrespective of your age. This proposition that somehow there is nothing in this for all Australians that is just politicking, disappointing politicking from the Leader of the Opposition.
PETER STEFANOVIC: Your Government was very critical of Labor’s debt when it was about $200 billion, now it’s a whole lot more than that, how do you reconcile that?
MATHIAS CORMANN: Well it was a very different context. Labor was dealing with a global financial crisis, which even globally, had an effect on the global economy of just 0.1 per cent in terms of contraction. What we are dealing with here is 45 times as large. Forty five times as large. The contraction in the global economy is 4.5 per cent this year. That is a real crisis. In the context of a real crisis, the Government did have to step up. We did have to provide support to the economy, to business, to working Australians, to those Australians who had lost their jobs. There really was no alternative. If you look at Australia’s fiscal position in an international context, we remain in a very strong fiscal position comparatively speaking. If you compare our debt position, even at its peak, to the US, to the UK, to Europe, to Japan, we are in an incredibly strong position.
PETER STEFANOVIC: There are still going to be a lot of people who are unemployed by Christmas time. They will argue, and critics will argue, what is the point of a tax cut if people don’t have a job?
MATHIAS CORMANN: That is why there are a whole range of measures. The tax cut which goes to more than 11 million working Australians will help boost aggregate demand and is one of the components of the Budget that will help strengthen the economy. There are a whole range of other measures encouraging businesses to invest in their future growth and success because a growing business, a viable, profitable, growing business, will hire more Australians again. The focus is to save, to keep saving as many jobs as possible, to restore as many jobs as possible that were lost and to create as many new jobs as possible. That will be something that will benefit Australians all around. All working Australians, all Australians looking for an opportunity to get ahead, will do better as a result of businesses starting to invest again.
PETER STEFANOVIC: What is the total debt going to be?
MATHIAS CORMANN: We have made projections in the Budget. Net debt as a share of GDP will peak just below 44 per cent mid-2024, gross debt will continue to increase until it stabilises at around 55 per cent. So at the end of the medium term, at the end of a ten year period, net debt is projected at about $1.2 trillion and gross debt is projected at about $1.7 trillion.
PETER STEFANOVIC: This goes against everything you stand for, this kind of high debt, this must be giving you conniptions?
MATHIAS CORMANN: Actually, the first six years in Government, Australia and our Government, we worked flat out to repair the Budget, to strengthen the economy, to get ourselves in the best possible position. And that stood us in good stead going into this crisis. At a moment of crisis like this, it is the responsibility of Government to step up. I am absolutely comfortable with this. It is a matter of great personal pride that the work we did during our first six years in Government prepared Australia so well to put the resources we needed into the health system, to put the resources into the economy, to support business, to support jobs as we have been able to do. And to now put the resources into this recovery, to make sure we absolutely maximise the strength of the recovery moving forward.
PETER STEFANOVIC: There is a whole lot of unknowns here though, in many regards it is a gamble. You don’t know what is going to happen if there is another outbreak. You don’t know really what is going to happy when it comes to a vaccine. We all hope that there is going to be a vaccine next year, but there might not be.
MATHIAS CORMANN: So what do you suggest we do? In every Budget there are always unknowns. They are Budget estimates. They are called Budget estimates for a reason. In the context of a pandemic and in the context of the year we have had, of course there are a whole range of unknowns, there are always uncertainties. Which is why you make judgements based on the best available information in front of you. When better information becomes available, you improve your estimates. What is the alternative? We do not make any decisions because the information in front of us isn’t perfect? I do not know what the critics who make that sort of argument actually are arguing for, that we somehow don’t make a decision because we do not have black and white perfect 100 per cent certain information about what actually eventually will happen.
PETER STEFANOVIC: Okay. It is easy to hand out money, it is a whole lot harder to bring it back. So how are you going to pay off that debt? And when do you starting doing that?
MATHIAS CORMANN: Clearly by strengthening economic growth moving forward. If you look at the payment side of the Budget, yes there has been a temporary and targeted boost in fiscal support. I have said this in previous interviews, I would encourage everyone across Australia to go to Budget Paper One, page 3-30. It is a very important graph, because what it shows is that there is no structural increase in the level of Federal Government expenditure beyond what was expected at the half-yearly Budget update before this crisis. There is a little spike in funding support over two or three years and then it goes back to the trajectory that we had before. The challenge moving forward is going to be on the revenue side because the economy clearly has shrunk on the back of this coronavirus pandemic. Even though it will start growing again, it will continue to be smaller than what it was previously expected to be. And that has an impact on Government revenue. Government revenue will be lower for some time, but our payments will be back to where they were before this crisis very soon.
PETER STEFANOVIC: Minister you, this is your last Budget obviously, you have presided over seven Budgets. You did promise, or you had hoped, that there would be seven surpluses but you ended up with seven deficits. How does that sit with you?
MATHIAS CORMANN: Well we inherited a massively deteriorating Budget position back in 2013. When we came in in 2013, the economy was weakening, unemployment was rising and the Budget position was rapidly deteriorating. We did work very hard to turn that situation around. We did turn that situation around. We did get the Budget back into balance. We were on track for a surplus in 2019-20, and indeed for the entire medium term moving forward. But, events happened. We know why we are here. We know that we were hit by an external unexpected event of massive proportions and we had to respond to it in the best way that we could. We went into this in a much better position as a result of the work that we did before.
PETER STEFANOVIC: But personally I know there are events that are out of all of our control. But are you disappointed about that, that you weren’t able to see a surplus in the end?
MATHIAS CORMANN: I am personally satisfied that we were in the position we needed to be to respond to this crisis better than just about any other country around the world as a result of the work that we did before. Would I have preferred to deliver surplus Budgets all the way through? Of course. But in the end we have to make judgements about what is in the best interests of people around Australia and that is what we have done.
PETER STEFANOVIC: Are you going to miss all this?
MATHIAS CORMANN: I have loved this job. But, you know, there are other things to do I am sure.
PETER STEFANOVIC: Well will you be cheering from the sidelines?
MATHIAS CORMANN: I will be citizen Cormann and very confident that the Morrison Government will continue to deliver good Government for Australia.
PETER STEFANOVIC: Do you know what your next job is going to be just yet?
MATHIAS CORMANN: We will find out in the future.
PETER STEFANOVIC: Finance Minister, Mathias Cormann, appreciate your time as always. Good to see you. Thanks for joining us this morning.
MATHIAS CORMANN: It was good to be here.