Senator the Hon Mathias Cormann

RICHARD KING: Joining me now is the Federal Finance Minister Mathias Cormann. Good morning Mr. Cormann.

MATHIAS CORMANN: Good Morning Richard. Good morning to your listeners.

RICHARD KING: You're doing the sales job and in a very real sense you are being a salesman at the moment for the Budget, Mr. Cormann.

MATHIAS CORMANN: Well we are trying to explain the decisions that we have made and the reason for those decisions. We inherited a very difficult Budget situation from our predecessors, the spending growth trajectory that we were on was unsustainable and would have weakened our economy and our prosperity into the future if we didn't address it. So yes, I am out today and yesterday, together with the Prime Minister and the Treasurer, very much trying to explain what it is that we are doing and why.

RICHARD KING: Who were very quickly out and about and expressing his views on the Budget was New South Waled Premier, I'll actually be talking to Andrew Constance, the Treasurer a little bit later this morning who described the Budget as a bit of a kick in the guts for the people of New South Wales and I think a number of other Premiers who made the same sort of statement and it would appear that States are not particularly happy, Mr. Cormann, with the Federal Budget announcements, particularly the cuts to health and education.

MATHIAS CORMANN: Well Mike Baird is a great friend. He is a great Premier for the great State of New South Wales, but on this occasion I disagree with him.

The Budget was a reality check. It was a reality check for everyone. The spending growth trajectory that we are on as a country was unsustainable. As a Government we can't continue to spend money that we haven't got. The previous Labor Government did throw cash around everywhere, including to the States, beyond what was affordable. What we are saying to everyone, including the States, is that everyone has to contribute to the effort to put our Budget back on track, to get our economy onto a stronger foundation and what we would expect the States to do, the same as what we are doing at a federal level, is to look at the way that they are providing services, the way they are running their Government administration to make sure that everything is as efficient and as well targeted as possible. Ultimately, States and Territories are responsible for running Schools and Hospitals. The Federal Government is contributing and that contribution will continue to increase. It just won't increase as fast as it might have under the previous government because they were trying to give away money that they didn't have.

RICHARD KING: In the lead up to the handing down of the Budget on Tuesday night, a lot was said about spreading the pain amongst all Australians, but I think many analysts have had a look at it and said 'well it would appear that the most vulnerable, low income earners, unemployed, disabled people are carrying more of the burden than the top end of town and big business.' Minister?

MATHIAS CORMANN: What you call the top end of town and higher income earners are already paying significant levels of tax and we have asked them in this Budget to make an additional, special effort on top of that. Inevitably, when you try to get your spending growth trajectory under control and you try to reduce your level of spending into the future, then inevitably that will impact on people who receive government payments. The trajectory that we inherited would have taken Australia towards spending of 26.5 per cent as a share of GDP, which compares to 23.1 per cent as a share of GDP in the last year of the Howard Government. If we ever wanted to balance our Budget, that would mean we would have had to massively increase taxes right across the board. Massively increase taxes. Now if we had to increase taxes to the extent necessary to cover that sort of spending growth that Labor locked in to the Budget, we would lose more jobs, we would weaken our economy, we would be less competitive internationally with what we do and it wouldn't be a very good situation for us to go to. So what we are trying to do is build a stronger economy, which is more resilient, more prosperous where everyone has the opportunity to get ahead and really what we very much are trying to do is to replace the old age of entitlement with the new age of opportunity.

RICHARD KING: 2HD it is eighteen to eight, my guest Federal Finance Minister Mathias Cormann. Labor, Greens, Palmer United Palmer have all said they will oppose the $7 GP Payment, obviously you say it is going to fund the new Medical Research Future Fund. Well in response to that, our Prime Minister is open to quote 'horse trading,' does that mean everything is negotiable in the Budget?

MATHIAS CORMANN: The plan that we put forward in the Budget on Tuesday night is a plan that in our judgement, Australia needs right now. In relation to the co-payment for GP visits and the like, that is part of our plan to do two things. One it is part of our plan to make funding for our health system, our world class health system sustainable into the future and it also provides the opportunity for investment in a $20 billion Medical Research Future Fund, which will help us find cures for many of the current diseases into the future. Look I have been in the Senate now for seven years and I have seen many people in the aftermath of a Budget make quick judgements and then on reflection, revisit those judgements down the track. What we will be doing, the same as we are trying to explain the reasons for our decisions to everyone across Australia. We will be having those conversations with people in the Senate and obviously we are trying to persuade them of the merits of what we are putting on the table. I am hopeful that as we go through that process that on some of these things people will change their mind.

RICHARD KING: Yes, well several of our State Premiers were very quick to come out, as I said earlier, Mike Baird in particular, 'a kick in the guts to the people of New South Wales' and it particularly refers to the $80 billion cut to school and hospital funding.

MATHIAS CORMANN: Can I just correct you there? Everybody talks about an $80 billion cut. What we are doing is, we are not cutting funding to hospitals and schools, we are just not growing it at that unrealistic, unaffordable rate that Labor had locked into the forward estimates. We will continue to increase funding, federal funding for schools and hospitals, but we are doing it on a base of a more realistic trajectory.

RICHARD KING: And you are asking States to pick up the tab…interrupted

MATHIAS CORMANN: No. What we are asking the States to do, is to run their schools and hospitals more efficiently and at the end of the day States and Territories are responsible for schools and hospitals and if they think they can't run their schools and their hospitals with the funding that they have got available, they have got to make their own revenue decisions too.

RICHARD KING: Yes. But what a lot, certainly State MP's are saying is that you are really forcing the States into asking the Federal Government to increase the GST. You are a Western Australian Senator, WA Premier Colin Barnett has said that he is happy to discuss the idea of upping the GST. Also your fellow WA Liberal Senator Dean Smith, yesterday urging your party to take the plunge and reignite the national debate on what's a very prickly issue, GST, but it does appear that's the way that we are heading, an increase in the GST. Mr Cormann?

MATHIAS CORMANN: We are not forcing the States to do anything. The States are sovereign. State Governments are sovereign governments and they can, in a very adult way, make their own judgements on what they think is required. What we are saying to the States is, you're responsible for running schools and hospitals, yes we are helping, but we can't just throw money around that we haven't got. So we do have to be on a more realistic funding growth trajectory. Now as far as the GST is concerned, we made a clear commitment in the lead up to the last election that we won't make any changes to the GST in this term of Government and we won't. But we will be having a tax review process that will start shortly and obviously the States and Territories are free within that context to make whatever suggestions that they think are appropriate.

RICHARD KING: Well just in response to that, you did say, no GST increase but look I won't harp on about it, but there was also the comment that we would have no new taxes and we certainly do have a few of those.

MATHIAS CORMANN: If I can just pick you up there, and I am reluctant to argue the semantics, but when people say that we said no new taxes that is actually not right. We went to the election promising a Paid Parental Leave levy which was a 1.5% company tax levy. So to suggest that we said no new taxes is not right. What we have done in this Budget, we haven't introduced new taxes. We have increased existing taxes. We have introduced a temporary 2 per cent increase in the top marginal tax rate for high-income earners, people earning more than $180,000 a year and we have reintroduced indexation of the existing fuel excise. We haven't introduced new taxes, but I would take issue with the proposition that we went to the last election saying no new taxes, because we quite transparently put a tax on the table in the lead up to that election.

RICHARD KING: Just looking at something specifically Newcastle, the CSIRO looks like it is going to take a bit of a hit and here in Newcastle we have a world leading energy research centre, the CSIRO centre here in Newcastle. I think they employ something like 500 people and I think they are feeling a little bit twitchy, Minister?

MATHIAS CORMANN: The CSIRO is a very important organisation for Australia and it will continue to be a very important organisation into the future. As I have said at the beginning of the interview, everyone across Australia has to contribute and we have got to make sure that the spending growth trajectory that we are on is sustainable. Right now, after the first five years of the previous government's Budgets, they had $191 billion of deficits, their last Budget left us with another $123 billion worth of projected deficits. Now the problem with deficits is that what we are essentially asking our children and grandchildren to do is pay the price for our lifestyle today. It is a bit like putting money for your groceries and your drinks and whatever on your credit card, letting the credit card run up, letting the interest capitalise, getting another credit card in order to pay the interest on your credit card and then asking your kids down the track to pay it all back, reducing their opportunity in the process. Because of course you are reducing their disposable income to look after their own needs and aspirations as they go through life. That is not appropriate in our view and that is why we think it is important to get the Budget back in balance.

RICHARD KING: A question without notice Minister, Clive Palmer has proved you can buy your way into politics, do you think there should be a limit on funding for campaigns for election campaigns?

MATHIAS CORMANN: In the parliament we are going through a process of reviewing all of the events in the course of the last election and the by-election, the WA Senate by-election that was caused by some issues with the Electorate Commission. The Government will review any of the recommendations that come out of that and we will make some judgements at the appropriate time.

RICHARD KING: And look people are sceptical as a final question that funds from this increased petrol excise will go towards roads. In a number of countries I think it is legislated that in the United States I think, that all of their money from their fuel tax goes into roads. It is not the case here, is there a guarantee that all of that money will go back into roads? That extra money?

MATHIAS CORMANN: We have made that very firm commitment that all of the money from the increase in the fuel excise will go into roads and we are intending to legislate that.

RICHARD KING: Yeah, good. Okay thank you very much for your time this morning Mr. Cormann.

MATHIAS CORMANN: Good to talk to you Richard.

RICHARD KING: Yes good to talk to you, that is Federal Finance Minister Mathias Cormann on 2HD.