Senator the Hon Mathias Cormann

PETER VAN ONSELEN: We’re joined now, live out of Perth by the Finance Minister and WA Senator Mathias Cormann. Thanks very much for being there Senator. We’ll start, lots to talk about obviously, but we’ll start obviously with the WA Election. How confident are you that the Liberal Party will retail its number three spot, which means electing Linda Reynolds into that position. Keeping in mind of course that she won on either of the disputed counts back in September.

MATHIAS CORMANN: Linda Reynolds did win fair and square in September. Right now with less than 70 per cent of the vote counted we’re confident that we’ve won two positions and we are in a competitive position for the third spot. We would expect that with pre-polls and postal votes yet to be counted that our position will strengthen in the days and weeks ahead, but obviously there is a long way to go.

PETER VAN ONSELEN: So are you disappointed with where the vote was at? Obviously Paul Kelly spoke about the dire primary vote for Labor, so we take that as a given. But nonetheless, on the Liberal side, looking at the numbers, a swing against of 5.5 per cent, that’s not insignificant.

MATHIAS CORMANN: It is broadly in line with what happens at by-elections. Mostly at by-elections there is a swing against the Government of the day. We are in a situation right now where we have to make difficult decisions to fix the mess we have inherited from our predecessors. The average swing historically in a by-election against the Government of the day is about 6 per cent. So what we have seen in Western Australia is broadly consistent with that. Add to that the fact that it is a Senate by-election with about a dozen additional candidates compared to the time of the general election and that is the sort of dynamic at play. If you look at the Labor result, Labor has recorded barely above 20 per cent of the vote. The big story of the election here yesterday is the complete and utter vote of no-confidence in Bill Shorten’s and Labor’s approach to this election here in Western Australia, which is broadly consistent with the strategy they pursued in the Griffith by-election. They’re trying to attack us for doing what needs to be done to repair the Budget and resisting our policy mandate in relation to things like scrapping the carbon tax and the mining tax. Clearly voters in Western Australia, as voters in Griffith have before, are rejecting Bill Shorten’s and Labor’s approach to this Parliament. 

PAUL KELLY: Minister, what’s your explanation for the very strong showing by Clive Palmer? Is this a case of him simply buying votes?

MATHIAS CORMANN: Again, in a by-election people can express a protest without changing the Government. Clive Palmer spent more than $5 million on this campaign, in a relatively small market here in Western Australia. He has spent more than all of the other parties combined on this election, so.... interrupted

PETER VAN ONSELEN: Why was his money of value when he was part of the LNP and he was donating that to your side of politics, but suddenly he’s simply buying votes now that he’s doing it for himself rather than for the Coalition? 

MATHIAS CORMANN: I don’t believe Clive Palmer ever invested those sorts of amounts of money when he was a member of the LNP in Queensland.

PETER VAN ONSELEN: It was in the millions though, all up though, I mean over a sustained period?

MATHIAS CORMANN: Peter, I would not have a clue what Clive Palmer did or didn’t do in the past. What I do know is that in this campaign, here in Western Australia he has spent well above $5 million on campaign advertising and clearly that has had an effect.

PAUL KELLY: We saw in the campaign Tony Abbott criticising the Palmer Party. Was this wise? And are you confident that the Government can work with Clive Palmer in the Senate?

MATHIAS CORMANN: When you are involved in a political contest, you have to make sure that you put your arguments forward and that involves a compare and contrast with all of the alternatives that put themselves forward. In terms of working in the Senate with Clive Palmer, or indeed others, well we will work with anyone that is going to come on board to work with us to build a stronger more prosperous Australia. We have a policy agenda to build a stronger economy, create more jobs, repair the Budget mess that we’ve inherited. Of course we will work with anyone represented in the Senate to give effect to that in the national interest.  

PAUL KELLY: But do you recognise that there may well be a possibility that you can’t get your important legislation through the Senate, through the new Senate?

MATHIAS CORMANN: In relation to any and all of our policies involving legislation, we will put them to the Senate. We will make our case. We will continue to make our case to the people of Australia. We’re hopeful that we’ll be able to get our agenda through Parliament, including through the Senate if...  interrupted

PETER VAN ONSELEN: You must be concerned though Senator, you must be concerned the potential if you like for and obstructionist Senate. Maybe not in the mining and carbon taxes where Clive Palmer’s views have been pretty well known, particularly the carbon tax. But when you move beyond those two unwind elements of dealing with the Labor Party, there must be real concerns in the Government that the rest of your agenda is going to be stymied or has a real risk of being stymied in the Senate.

MATHIAS CORMANN: Since the last election we’ve had Labor and the Greens controlling the Senate and take a completely negative and destructive approach to anything that we’ve put forward, completely ignoring the election result in September last year. So from our point of view on 1 July there will be more options for us in terms of working with Senators from a broader range of backgrounds in order to achieve our commitments to build a stronger economy and create more jobs.

PAUL KELLY: Okay, well let’s just talk about the Greens. The Greens polled extremely well in this Senate election. What’s your feeling about that? And to what extent are the Greens now really riding a tide of hostility towards the Abbott Government?

MATHIAS CORMANN: I wouldn’t overstate it. I heard your opening remarks. We’ve got to remember this was a by-election. It was a strong result for the Greens, but the Greens are the ultimate protest party. If you want to express a protest against the Government and if you don’t have confidence in the main opposition party led by Bill Shorten, then clearly a lot of people parked their vote with the Greens because they didn’t have confidence in Labor and Bill Shorten.

PAUL KELLY: Well look, I mean, if you actually look at the primary vote here for Labor vis-a-vis the Greens, to what extent do you think that Labor’s got a problem? Because the Greens seem to be doing very well mobilising the protest vote against the Abbott Government. They’re doing much better than Labor and if this is transmitted across the board at the national level, to what extent does this pose a problem for Labor?

MATHIAS CORMANN: Labor has got a big problem. Labor is at risk of getting marginalised and getting too much into the corner on the Left. What Labor needs to do is reflect on why they lost the last election. Reflect on what it was that people voted for in September last year in terms of scrapping their anti-competitive taxes which have damaged the economy, in terms of people voting for a government that repairs the Budget and really revisit their approach to all these sorts of issues.

PETER VAN ONSELEN: Well let’s shift to the economy now Senator. Finance Minister, you’ve got a big responsibility leading up to the May Budget. With the WA Election out of the road how long is it going to be before we get to see this Commission of Audit so that the public can get a bit of a sense of it?

MATHIAS CORMANN: What we have always said is that the report of the Commission of Audit will be released in the context of the Budget. Obviously....interrupted

PETER VAN ONSELEN: So how long is that likely to be?

MATHIAS CORMANN: When we’re in a position to release it, we’ll release it Peter. The Commission of Audit was a report to Government. We asked the Commission of Audit to look right across Government to identify areas of opportunity to essentially ensure that Government spending is as efficient and as well targeted as possible, to cut waste, to cut duplication and so on. We’re currently working our way through all of these sorts of issues very carefully and methodically in the lead up to the Budget on the second Tuesday in May.

PETER VAN ONSELEN: I understand that you’re going to take your time and release it at a time that suits you after you’ve fully considered it, but that said with the Budget so close you must have a bit of an idea, a snapshot for us I suppose of how much of the recommendations within the Commission of Audit in broad terms the Government is looking likely to implement. People talk about the tough first Budget from Peter Costello after the 1996 Election win, but actually the Commission of Audit he commissioned he only delivered about half of it rather than all of it. Are you looking on similar terms?

MATHIAS CORMANN: Well Peter, I’m sure that you would like me to deliver the Budget here on your show this morning, but I will leave that to the Treasurer, Joe Hockey, on the second Tuesday in May. Now... interrupted

PETER VAN ONSELEN: But I’m not asking for details, more just like how does it look to you? This Commission of Audit, a lot of recommendations, sweeping as they are, is the Government likely to introduce more than half or less?

MATHIAS CORMANN: I’m not going to put a number on it. But by way of general comment, when you have a comprehensive review as the Commission of Audit has done for us, there are going to be things that you can act on immediately and there are going to be other things that you will be able to do over a medium to long term period. There are going to be some things, probably, that on reflection the Government decides are not sensible. That is the way you would generally expect that a government would deal with these sorts of reports.

PAUL KELLY: Well let’s talk about spending and numbers, Minister. We know that in the last Labor budget they talked about keeping spending to 2 per cent real across the next decade. Now you’ve obviously got on top of all the numbers. So can you give us an idea of what the outlook for spending is on a no policy change basis? That is, where are we in terms of not just the forward estimates, but what sort of spending increases we’re currently looking at in those years beyond the forward estimates as well?

MATHIAS CORMANN: That is a very good question. Labor did put a lot of spending growth into the period beyond the forward estimates, which wasn’t transparent to people as they went to the election. In real terms, without any change, spending in 2017-18 is on track to increase by 6 per cent, which is triple what Labor’s supposed fiscal target was in their Budget. Just as an aside, it would be funny if it wasn’t so serious, when the Shadow Treasurer and the Opposition Leader came out the other day, to say if only we stuck to Labor’s fiscal rules, everything would be fine and the Budget would easily get back into surplus. Well Labor at that point had already put us on a trajectory where in the first year beyond the forward estimates spending was set to increase by 6 per cent in real terms. That includes, by the way, a 66 per cent increase in foreign aid spending in real terms and spending increases well ahead of 2 per cent  across all of the major areas, health, education, social services and so on. These are obviously the ... interrupted

PETER VAN ONSELEN: So Julie Bishop is going to be massively cutting back spending on foreign aid?

MATHIAS CORMANN: Again, I’m not going to be releasing the Budget today. I’m just pointing to the facts and the facts are that while Labor said they would limit spending growth to 2 per cent in real terms, they actually locked the Budget into a trajectory of growth three times as high as that. If you look over the period of six years that Labor delivered budgets, they committed to spending of $340 billion more than they were raising or expecting to raise in revenue. $123 billion worth of deficits projected over the current forward estimates. Government debt heading for $667 billion. Clearly that is not sustainable. Clearly that is why Joe Hockey and I, with the Prime Minister and the whole Cabinet are working very hard to identify where we can make some judgements most appropriately, to put the Budget back on to a more sustainable track.

PAUL KELLY: Now presumably you accept that a responsible Government has got to get the Budget back into surplus before ten years? I just want to establish that that is your position. That is the way that Government is thinking.

MATHIAS CORMANN: Our position is to get the Budget back into surplus as soon as possible. The details of our plan on how quickly we can get our Budget back into surplus and how will obviously be part of the Budget.

PETER VAN ONSELEN: But as soon as possible, presumably it is possible in less than ten years in your opinion. 

MATHIAS CORMANN: As soon as possible.

PETER VAN ONSELEN: But then, so is that not necessarily in ten years?

MATHIAS CORMANN: Again Peter, as I’ve said in my first answer, all of the detail in terms of how fast we can get the Budget back into surplus will be in the Budget delivered on the second Tuesday in May. We will work as hard as we can to get the Budget back into surplus as quickly as possible because we understand that the situation that we’ve inherited from Labor is not sustainable. In fact it is very much in the national interest for us to repair the Budget as quickly as possible. 

PAUL KELLY: Now in terms of your general approach here, in a speech given by Martin Parkinson, he looks at both the spending side and the tax side. Is it fair to say that the Government would approach this task working on both the spending side and the tax side? Is that the framework that you’ve got?

MATHIAS CORMANN: It is a statement of the obvious that if you want to repair the Budget, if you want to pursue fiscal consolidation there are two ways to do it. It is looking at the revenue side and at the spending side. In terms of revenue, the best way to grow the Government’s revenue is to build a stronger economy. Because a stronger economy not only delivers increased prosperity for all, it also delivers increased revenue for Government without the need for...interrupted

PETER VAN ONSELEN: But Martin Parkinson...

MATHIAS CORMANN: ... all these new additional taxes that we got from the previous Government.

PETER VAN ONSELEN: But Martin Parkinson specifically says that growth alone won’t get us there that there needs to be looking at certainly reigning in spending, he acknowledges that, but he also says that the GST via tax reform must be on the agenda. I understand that the Government doesn’t want to break its commitment in this term to embark on that kind of tax reform. But the GST will be part of your tax reform mix later in the year when you move towards your tax summit. Are you open minded at least about going to the next election arguing the case for a mandate to do something on the GST?

MATHIAS CORMANN: Our position is very clear. We will not change the GST, full stop, end of story....interrupted

PETER VAN ONSELEN: Ever?

MATHIAS CORMANN: ...we’ve taken a tax policy to the last election, which involves scrapping the carbon tax, scrapping the mining tax, reducing company tax and of course beyond that we will pursue medium to long term tax reform priorities through a tax white paper process. Whatever proposals come out of that process we would take to the next election before acting on any of them.

PAUL KELLY: Minister, do you accept that if we want a growth economy, then one of the necessary reforms is to move more of the tax burden to the indirect tax side?

MATHIAS CORMANN: Our position is that if you want to grow the economy more strongly you need to reduce the overall tax burden. That is very much what the Coalition is about. In this term, that is why we want to scrap the carbon tax as soon as possible, scrap the mining tax, and reduce the company tax rate... interrupted

PAUL KELLY: Now look, I asked a very specific question, it goes to the heart of the speech given by the Treasury Secretary, he argued very strongly in this speech that the current balance between direct and indirect taxes is not really sustainable and we need to shift more to indirect taxation. Now that seems to me to be a very sensible proposition, it’s a general proposition, do you agree with that?

MATHIAS CORMANN: We’ll have a tax reform process, a tax reform white paper process, which will flesh all of these issues out in more detail and whatever recommendations that ... interrupted

PETER VAN ONSELEN: But we’re not fleshing out the details now Senator, we’re just asking for a philosophical position on direct versus indirect taxes. You’re the Finance Minister you must have one.

MATHIAS CORMANN: ... and I know that you would want me to lock myself into a position before we have actually gone through the process. I’m not going to do that. We are going through a careful and methodical process as we said we would and when we’ve got all of the information in front of us we will make the judgements.... interrupted

PAUL KELLY: When do we see the white paper? I mean in terms of the details about the white paper?

MATHIAS CORMANN: Sorry? 

PAUL KELLY: In terms of the details about the taxation white paper, when do we see this?

MATHIAS CORMANN: You can expect this to happen in the not too distant future. Obviously right now, our focus is on the Budget. The Budget will be delivered in May and then some time after that we’ll progress that... interrupted

PAUL KELLY: And can I ask the same question in the context of the white paper? Surely an objective of the white paper should be to assess the possibility of moving more towards indirect taxation. Do you agree with that as a white paper objective?

MATHIAS CORMANN: You want to lock me into the strategy we’d pursue... interrupted

PAUL KELLY: No I don’t.

MATHIAS CORMANN: ...well the objective of the white paper is to ensure that we’ve got the most competitive and the most efficient tax system possible, which helps to facilitate in the best possible terms stronger economic growth and stronger job creation. I’m not going to pre-empt what comes out of that process, but obviously whatever recommendations come out of it the Government will consider very carefully and then take a position to the next election, so that people across Australia can form a judgement on what we’re proposing.

PETER VAN ONSELEN: You mentioned a moment ago Senator, that you want to get the best tax mix for the Australian people when you go through this white paper process. How does that sit with things that Joe Hockey has said previously in relation to the GST? Where he said the only way we would pursue it is if all the States came on board. It strikes me as a little politically weak if you think ultimately, I’m not saying that you do now, but if you ultimately think that GST reform is the most effective type of taxation reform and therefore should be included. Surely a Treasurer that is only prepared to pursue if all the States line up behind him is taking a weak position.

MATHIAS CORMANN: I totally disagree with that characterisation Peter. I totally disagree with that characterisation. As far as we’re concerned we took a clear policy to the last election, which was that there would be no change to the rate or the base of the GST, full stop, end of story. Now you’re inviting me to speculate about things that may or may not happen in the context of a tax reform process that hasn’t yet got underway and I just won’t do that.

PETER VAN ONSELEN: But what I’m really saying though is that if the Treasurer’s view, if the Government’s view as an extension of the Treasurer’s view, is that if you will only pursue GST reform if every State premier lines up behind you, all it takes is one recalcitrant premier and there goes potentially the white knight required to fix the tax system according to the Secretary of Treasury.

MATHIAS CORMANN: Peter, I don’t think you actually listened to my answer there. We took a policy to the last election that there will be no change to the GST, full stop, end of story. So... interrupted

PAUL KELLY: Well Minister, we had a statement this week from the welfare sector. ACOSS said that it was happy to have a debate about the GST in the context of a wider discussion about tax reform. Do you welcome that?

MATHIAS CORMANN: I hope that ACOSS is going to be, and I’m sure they will be, an active participant in the tax reform process that we are about to engage in. Obviously I would like ACOSS ...interrupted

PETER VAN ONSELEN: But do you welcome their open-mindedness to the GST. ACOSS has an open mind on the GST, the Government must be happy about that.

PAUL KELLY: Or will you leave them out to dry?

MATHIAS CORMANN: Sorry?

PAUL KELLY: I mean do you welcome it, or are you just going to leave them out to dry?

MATHIAS CORMANN: I would welcome all parts of the Australian community and Australian business to actively participate in the tax review white paper process that we’re about to engage in. The Government will make judgements when we’ve got the findings and recommendations out of that review as is the proper process that we should follow.

PETER VAN ONSELEN: Alright Senator Mathias Cormann, thanks very much for your time this morning. I know its early hours over there in Perth. We really do appreciate it here on Australian Agenda. Thanks very much.

MATHIAS CORMANN: All good.