Senator the Hon Mathias Cormann

KIERAN GILBERT: This is PM Agenda, thanks for your company. With me now, the Finance Minister, Senator Mathias Cormann; Minister thanks very much for your time.

MATHIAS CORMANN: Good to be here.

KIERAN GILBERT: First of all, increasing the debt level. If Labor did this you would have been outraged, wouldn’t you?

MATHIAS CORMANN: We have to do this to fix Labor’s mess.  Wayne Swan in May when he delivered the Budget, he knew that he would reach the debt limit that is currently legislated by the end of the year. In fact the advice we have now from Treasury is that we would reach the $300 billion legislated limited by 12 December 2013.  If you look at the Economic Statement and the Pre-election Economic and Fiscal Outlook, it clearly indicates gross debt heading for $400 billion over the forward estimates.  In fact since then the Budget position has deteriorated even further. The problem here is that Labor left behind a Budget in very bad shape. Not only are the numbers bad that were in front of us in PEFO, the trend is very bad.

The Budget position continues to deteriorate. So what we have to do and what we’ve started to do and what the Commission of Audit will help us to do is reverse the trend, repair the Budget, put the Budget back onto a believable pathway back to surplus.

KIERAN GILBERT: It’s a very broad scope that you’ve given them in the Terms of Reference for the Commission of Audit headed by Tony Shepherd, the President of the Business Council.  It’s a broad scope but it is also restrictive in some sense because they are not allowed to look at the GST, you’ve said no increase in the rate or the base.  You’ve also said you are not going to touch health or education. These are two of the biggest spending portfolios.

MATHIAS CORMANN: Firstly, we are not going to change the GST but of course this is a review into the operations of government focussed on making sure that the operations of government are as efficient as possible, that taxpayers’ money is spent as wisely as possible. It does have a very broad scope. It can look across all of the operations of government. Now we are not going to cut spending to health and education, but we do want to make sure that we can spend more wisely, that we are going to spend achieving better outcomes for people across Australia. What people across Australia are expecting from us, from the government, is that they receive better services delivered in a more efficient way. So the overall funding envelope is one thing.  The quality of the spending within that funding envelope is of course a very important part of that equation as well.  In relation to health and education we think that the Commission of Audit can do some very important work for us.

KIERAN GILBERT: So when you talk about these two phases of the reports; one in January, one in March but you are talking about cuts that could be fed into the May Budget of next year.

MATHIAS CORMANN: There will be two phases. There will be an interim report to the government by the end of January and there will be a final report by the end of March. Incidentally in 1996 when the Howard government ran a similar process, that process took about three months from when it started to when it delivered its report to the government. The purpose of it is to receive recommendations, which will feed into the 2014/15 Budget process, which will help us to repair the Budget mess that we’ve inherited from Labor.

KIERAN GILBERT: Well if that’s the case and with this increase in the debt limit why didn’t you release the Mid-year Economic Update before you did this so we all know the state of the books as they stand?

MATHIAS CORMANN: We are going through a calm, methodical and orderly process.  We know that the Labor party has been out there jumping up and down wanting us to deal with things in the sort of panicked, disjointed and chaotic fashion that they used to in government.  We don’t think that led to very good outcomes.  Our process is going to be very purposeful, it’s going to be very methodical so what we did of course since the election, we’ve started a very thorough review of grants spending across government.  We’re scrutinising grants spending right across government to make sure there is no waste, no double ups and that spending aligns with the priorities of the government.  We are now announcing today the Commission of Audit.  We are also working on the Mid-year Economic and Fiscal Outlook, which will be released before Christmas and we are also putting in train all of the processes in the lead up to the 2014-15 Budget. 

KIERAN GILBERT: You’re not talking Christmas Eve or something though; we will have time to scrutinise it while people are still focussed on it.

MATHIAS CORMANN: I can promise you we will not be releasing the Mid-year Economic and Fiscal Outlook on Christmas Eve.

KIERAN GILBERT: Let’s look at some of the other specific elements of this review.  The consolidation of agencies and boards and other looks at the effectiveness of government machinery do you still stand by the commitment that job losses in the public service will be only through attrition?

MATHIAS CORMANN: There’s a whole range of different things in that question. Firstly, right now there are redundancies happening across the public service as a result of decisions that Labor made in government in its recent Budget and Budget updates. Secondly, yes we did take a policy to the last election which we are committed to and which we will implement, which is to reduce the size of the public service through national attrition by 12,000. Now beyond that, people across Australia expect us to spend their money wisely and to make sure that we can shift as much of the limited resources available to government as possible away from pure administration to service delivery. The objective has to be that the resources that are made available to government by taxpayers are targeted at delivering better outcomes for people and not just ever increasing bureaucracy.

KIERAN GILBERT: Well that’s one of the things that’s been ever increasing in recent years has been middle class welfare.  Attempts to rein it in by the Labor government but you’ve asked this Commission to look at the rising cost of social spending. Is that something that does need to be reined in as part of one of the structural shifts that you’re talking about?

MATHIAS CORMANN: We think it is very important for a Commission of Audit to take a strategic look at the operations of the whole of government and to provide a report to government which government then will consider. What we’ve said is that obviously in terms of responding to the recommendations that will come our way, we will respond to them in a way that is consistent with the commitments that we took to the last election. We will not be implementing recommendations that will be inconsistent with our pre-election... interrupted

KIERAN GILBERT: Not in the short term, but it could provide you with the agenda for the second term and middle class welfare could be one of those things that you’d think almost inevitably that you’d have to rein in.

MATHIAS CORMANN: The terms of reference that we’ve released today for the Commission of Audit are very explicit.  They have a very important task. The objective of course is to make sure that we can put the Budget on a sustainable medium to long term footing. We have serious challenges, one because of the state of the Budget that we inherited from Labor, but two also because there are some fiscal pressures on the spending side in particular for example in relation to the ageing of the population. So there is some important work to be done. We want the Commission of Audit to do its work without any inhibitions from government but of course ultimately government will make decisions on what we think is sensible to implement and what we think is not.

KIERAN GILBERT: Senator Cormann, appreciate your time

MATHIAS CORMANN: Always good to be here.