Senator the Hon Mathias Cormann

SANDI ALOISI: The Federal Government's Budget will face some of its sternest critics today when Government members gather for a party room meeting which will give backbenchers a chance to put their views on the economic strategy. Several Government members have openly criticised the Budget, both its contents and efforts by Tony Abbott and senior ministers to sell it to the public. Mathias Cormann, the Finance Minister and Acting Assistant Treasurer has been central to the design and selling of the Budget. He joins us now and is speaking to Marius Benson.

MARIUS BENSON: Mathias Cormann good morning.

MATHIAS CORMANN: Good morning Marius.

MARIUS BENSON: The latest contribution on the Budget debate comes from Phil Bowen who is the Parliamentary Budget Officer, the Parliament's independent Budget advisor, he lends some support to the Government view that something had to be done about debt and deficit, although he doesn't share your sense of urgency.

MATHIAS CORMANN: Well what the independent Parliamentary Budget Office has said, which was incidentally set up by the previous government, is that Australia has one of the fastest growing debts in the world. That is exactly what we have said, that we have to take corrective action if we want to protect our living standards and if we want to build better opportunity and a stronger economy for the future.

MARIUS BENSON: But Phil Bowen says I don't think that the projected debt and deficit is a fiction at all, but neither am I saying we have an immediate emergency. No sense of we are in a fire engine and we have to drive over fences to put the blaze out from Phil Bowen.

MATHIAS CORMANN: The only reason we are not in a worse position is because in 2007 the previous government inherited a very strong economy and a strong Budget, with no government net debt, a $20 billion surplus and $50 billion in the bank. The problem is that the massive spending growth trajectory that the Labor Party has put Australia on is unsustainable, which, if it is not corrected, will damage the economy and our prospects into the future.

MARIUS BENSON: Your reportedly, you the Government, are planning an information campaign to sell the Budget, that is obviously what you are involved in now. Are you planning something in addition to what you are doing now?

MATHIAS CORMANN: There is nothing unusual about the Government explaining, making sure that people across Australia understand all of the key features in the Budget and that will be done in the usual way.

MARIUS BENSON: So no big TV campaign or anything coming up?

MATHIAS CORMANN: We will be doing what needs to be done in order to ensure that all of the different people and groups across Australia that are impacted by various Budget decisions understand exactly how they are being impacted and how they are not being impacted.

MARIUS BENSON: Well those groups by and large seem unhappy with the sense they have gathered from the first fortnight. Can you change that?

MATHIAS CORMANN: What we have had to do is reduce the massive and unsustainable spending growth trajectory that Labor had put the country on. Obviously, if people are no longer receiving some of the growth in payments from government that they may have expected they would get, that is not going to be universally popular. But, we are doing what needs to be done in order to protect our living standards and in order to build a stronger, more prosperous future for Australia.

MARIUS BENSON: Even your own troops are unhappy and quite publicly unhappy. A significant number of backbenchers have spoken out about aspects about the Budget. One criticism was a lack of consultation, who designed this Budget? Was it sort of gang of three of Mathias Cormann, Joe Hockey and Tony Abbott?

MATHIAS CORMANN: Again, the process to put the Budget together is the usual process. Obviously the Expenditure Review Committee and the Cabinet are very focused on making sure that we make all of the necessary judgements to build a stronger economy and to repair the Budget, as we said we would do in the lead-up to the last election.

MARIUS BENSON: Ron Boswell has seen 30 Budgets in his time as a Queensland Senator, he says this is a very head sell and that's fine, that fits with your approach, a tough Budget, the Budget we had to have, but that is not what Senator Boswell is saying. He is saying that the concern expressed to him is from people saying they believe there is an equity problem, it is falling on the lower income earners more so than higher income earners, it is not just tough, it's unfair. And I think in previous conversations you've agreed that the greatest impacts of cutting government services is on lower income earners.

MATHIAS CORMANN: It is a Budget that we had to have. We did inherit a Budget in a mess. $123 billion of projected deficits on top of $191 billion of deficits in Labor's first five...interrupted

MARIUS BENSON: Can I get you to address that question of equity though, that the axe falls hardest on the lowest earners.

MATHIAS CORMANN: Well the Budget that we have delivered is a fair Budget. It does seek to spread the effort fairly and equitably across the board. But having said that obviously, if you reduce the spending growth trajectory of government, which we must do, then inevitably that will impact on those who receive government payments in one way or another whether that be the States or individuals.

MARIUS BENSON: So those individuals who rely on government payments, the poorer individuals get to bear a greater share of the burden?

MATHIAS CORMANN: No, that's actually not what I am saying. What I am saying is that inevitably if you reduce government spending, then people who receive government payments will be impacted by that. But what we have done in the Budget is to ensure that taxpayer funded welfare support is targeted at those most in need and that is appropriate when we are facing the debt and deficit disaster that Labor left behind. What we are dealing with, what we have delivered, is the Budget we had to have after six years of Labor debt and deficit disasters.

MARIUS BENSON: But tough measures, reducing family benefits, cutting unemployment benefits, lowering the pension rate of increase, charging for doctor visits, these are tough decisions and they affect disproportionally those least well off. Where was that toughness when you looked at the toughness that the tax breaks for the best off, the superannuation concessions, negative gearing, things like that that favour the wealthy.

MATHIAS CORMANN: Overwhelmingly, income tax revenue collected by government comes from higher income earners. But the point I would just make again is that after John Howard and Peter Costello paid off Labor's debt and fixed Labor's debt and deficit disaster in the 90s and early 2000s, they were able to improve benefits for lower and middle income earners. What we have now, after Labor made a complete mess of our Budget, essentially we have to pay the price by readjusting our spending growth trajectory to get ourselves back into a stronger position so that we will be able to deliver improved benefits sustainably into the future. But right now, we are dealing with a situation, courtesy of the waste and mismanagement of the previous government, that needs fixing in the national interest.

MARIUS BENSON: Mathias Cormann, thank you very much.

MATHIAS CORMANN: Always good to talk to you.