Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Wednesday, 7 October 2020
BRIAN CARLTON: I am getting some questions coming in in relation to the Federal Budget reveal last night by the Treasurer Josh Frydenberg, including Rodney from Cygnet. Rodney, I tell you what I’ll do, I’ll put that question to the Finance Minister, the Federal Finance Minister, Senator Mathias Cormann who joins me like. The co-author if you like of the Federal Budget. Senator good morning how are you?
MATHIAS CORMANN: Good morning Brian. Good morning to your listeners.
BRIAN CARLTON: It is one of those ones I guess you hoped you’d never have to deliver
MATHIAS CORMANN: Australia and the world were hit by an unexpected global pandemic, which has had very severe implications for our economy and for jobs. Initially the focus was on protecting people’s health, supressing the spread of the virus and cushioning the blow on the economy and jobs, but now we are well and truly focused on maximising the strength of the recovery and getting Australia out of this COVID recession.
BRIAN CARLTON: So you are going for the sort of hand up rather than hand out philosophy. Would that broadly underpin your thinking?
MATHIAS CORMANN: 100 per cent. We want jobs to be restored and new jobs created across the economy, but we understand that jobs do not grow on trees. Jobs are created by successful, viable, profitable businesses, which have the confidence to invest in their future growth because a growing business will hire more Australians. What we are really focused on is providing incentives and encouragements to business to invest in their future growth and also bringing forward income tax relief to more than 11 million Australians to help boost aggregate demand across the economy.
BRIAN CARLTON: What is the mechanism to deliver those tax cuts to ordinary workers? How would it actually happen?
MATHIAS CORMANN: As soon as there is an indication that there is bipartisan support for our income tax relief, which I hope will be very soon. The Australian Tax Office will be able to adjust their withholding rates, their PAYG withholding rates and it will be passed on in fortnightly pay packets. That is in relation to the income tax relief itself. In terms of the extension of the low and middle-income tax offset, that will be provided as a lump sum at the end of the financial year.
BRIAN CARLTON: Many of the business plans you have put in place as a result of the Budget, the most significant to me or just screaming at me is the 100 per cent instant asset write off. That is significant isn’t it? A big cost to the Budget in other words.
MATHIAS CORMANN: It is very significant. It is a cost to the Budget over the initial forward estimates period of about $26.7 billion, that’s for the full expensing of any investment for businesses with a turnover of up to $5 million. But it is essentially a bring forward of tax deductions. To the extent that we are letting businesses use them now, it helps them with their cash flow in the short term, but it also means that they are more profitable down the track for tax purposes because those deductions are no longer available down the track, which means that we will recoup quite a bit of that money after the economy has recovered in earnest.
BRIAN CARLTON: You have underpinned the creation of around about 450,000 jobs, a couple of plans involved in that, first is the apprentice and trainee plan, the second is hiring people who are currently on the JobSeeker program, again hand up rather than necessarily hand out. There are some concerns amongst some elderly Australians that that could actually produce some job churn, in other words somebody over the age of 35 might lose a job in order for that employee to go and employ somebody under 35 and get the subsidies.
MATHIAS CORMANN: No, that is not allowed to happen. There are very clear and strict integrity measures in place. Firstly, a business in that circumstance would not be able to attract the hiring credit. It has to be based on a new employee on top of the employees that are currently there. There are integrity measures as I say. There has to be both an increase in the overall payroll for a business as well as an increase in the number of staff and there are measures to prevent this sort of churn from happening that you are talking about.
BRIAN CARLTON: In terms of the infrastructure spend, how much of it is predicated on the States actually moving forward with projects on a use it or lose it basis? Is that true of all the infrastructure money you have allocated?
MATHIAS CORMANN: There is about $1 billion where we are saying we want to get this invested and rolled out and implemented into productivity enhancing economic infrastructure as soon as possible. We help fund infrastructure, but we do not physically deliver it ourselves. So it…interrupted
BRIAN CARLTON: This is the problem, Senator obviously the State Government sometimes drag their feet in cohort with local councils and all the other various interest groups. This really is putting the blow torch on the States to deliver these.
MATHIAS CORMANN: That is why we are saying this funding is available for you, but if you do not get cracking, if you do not get this delivered on the ground, then we will work with a State who can.
BRIAN CARLTON: There is so much involved in the Budget, let me just talk about a couple of the assumptions involved. The first is, how confident are you actually that there will be a working vaccine by the end of next year?
MATHIAS CORMANN: That is the advice in front of us. Let me just make this general point, every Budget is based on assumptions because we never have perfect information. At this point in time, when we are in the context of a pandemic and all of the uncertainties that come with this, the information in front of us is even less certain. But we have still have to make decisions and we have to make decisions based on the best available information in front of us. That is what we have done. We have openly and transparently reported on the assumptions that we have used so that everybody can see what the risks or upside opportunities are. If the information next year is that a vaccine came out sooner, then there will be a positive variation. If it is later, there will be a negative variation. But in the end you have to draw a line in the sand for a purpose of the Budget based on what is in front of you. As you get better information, you will be able to refine and improve the quality of the estimates.
BRIAN CARLTON: Okay, the other thing obviously we are trying to avoid is a third wave, or indeed a second wave depending on what State you live and the borders opening up appropriately. That is the genuine risk to all of these numbers isn’t it, if we end up with an almost a repeat of the situation in Victoria albeit in a specific jurisdiction or indeed nationally?
MATHIAS CORMANN: If something happens that we cannot currently predict that has a negative impact on the economy, then that will be bad for the Budget, it would be bad for business and jobs. That is why we have to do everything we can to minimise to the greatest extent possible the risk of that occurring. But that is always true. You only ever know what you know about the future. You can only ever plan based on what you can reasonably predict. If other events happen, then you have to reassess and readjust.
BRIAN CARLTON: Just a couple of other criticisms that have come in from various sectors, the lack of a definite number as to what the JobSeeker payment will drop to come December or early next year. Why have you not put a figure on that?
MATHIAS CORMANN: Because we want to have better data in front of us when we make that decision. At this stage the JobSeeker payment continues to be $250 a fortnight higher than what it was before this crisis. We have also lifted the amount of money people on JobSeeker are able to earn before they lose any of that support, from $105 a fortnight to $300 a fortnight. We want to have better information in front of us in terms of the strength of the recovery, the strength of the jobs recovery in particular, before we make a final judgment. This has been an important transitional support measure as we have gone through this crisis, but it has also created some distortions in the economy. Quite a few businesses are reporting difficulties in attracting staff who were on the significantly enhanced JobSeeker payment and that is obviously not something that you want to happen on an ongoing basis. We are just very carefully assessing the information, reviewing the data and will be making that judgement before the end of the year.
BRIAN CARLTON: How far ahead of the actual reduction though? People on JobSeeker clearly need some kind of guidance as to what is going to happen. How much heads up will you give them?
MATHIAS CORMANN: We will make that decision when we have all of the necessary information in front of us.
BRIAN CARLTON: The aged care sector not entirely happy either at the 23 odd thousand new aged care spaces that you have funded. The claim is that we need about four times that much.
MATHIAS CORMANN: In this Budget we are providing an additional $2.7 billion for the aged care sector including $700 million for measures in response to the COVID pandemic. We are very conscious of the fact that we need to continue to do more and there clearly will be a response to the report of the Royal Commission. There is more to come in this space. We have already done a lot in recent years, but we are very conscious of the fact that we will need to do more.
BRIAN CARLTON: I guess the other area of some complaint, it is a little more muted, it is in the public housing space, which I know you are not directly responsible for. Would you encourage the States to put a little bit more of their money into public housing?
MATHIAS CORMANN: State public housing is precisely that, State public housing. So of course I encourage the States to make judgements about what is appropriate in their respective jurisdictions to deal with the demand that is in front of them in their respective jurisdictions.
BRIAN CARLTON: How long is it going to take us to pay this off?
MATHIAS CORMANN: We have had to incur a significant level of debt by Australian standards. Though if you compare our position to what is happening in other parts of the world, we continue to be in a very strong position. Government net debt is expected to peak at about 44 per cent as a share of GDP in mid-2024. This will take some time, but by the same token what was the alternative to the decisions that we have made? Should we not have boosted the health system to deal with the pandemic? Should we not have provided support to the economy, to business, to working Australians, to those Australians who lost their job? We had to deal with a crisis event and we made the decision to step up and to ensure that we helped the Australian community through it in a way that gives everyone the best possible opportunity to get safely to the other side.
BRIAN CARLTON: Senator you are perceived as the Finance Minister, I think you are the longest in the one chair Minister…interrupted
MATHIAS CORMANN: For my sins.
BRIAN CARLTON: But you have announced that you are quitting the Parliament and will leave at the end of the year. The praise for you comes from all sides and I would just like to wish you all the best with whatever you choose to do in the future, which I have got a sneaking suspicion I know, but I won’t blow.
MATHIAS CORMANN: Thank you so much Brian, I very much appreciate that.
BRIAN CARLTON: Okay Senator I appreciate your time this morning, thank you.