Senator the Hon Mathias Cormann

DAVID LIPSON: Welcome back to Saturday Agenda. Our first episode for the year. I’m David Lipson, great to have your company once more. The Government was hoping the summer break would act as a big reset button after a ragged 2014. But the year has kicked off much the same as 2014 finished. The electorate is unimpressed. The Senate is showing no sign of cooperating and the backbench is nervous. The pressure for the Prime Minister continues to mount. Well returning to Saturday Agenda, the Finance Minister, Senator Mathias Cormann joins me now from Melbourne. Great to have you back on the program, Senator.  I want to start with the position of the Government ...

MATHIAS CORMANN: Good to be back and happy new year.  

DAVID LIPSON: Yeah, you too, you too. A lot’s happened since we saw you last. What’s your assessment of the position that the Government is in now?

MATHIAS CORMANN: My assessment is that in 2014 we made significant progress in doing what we said we would do before the last election. That is, implement our plan to build a stronger, more prosperous economy and create more jobs and to ensure that Australia is safe and secure. If you look at the employment numbers that came out for the final month of 2014, you will see that in 2014 more than 210,000 new jobs were created. More than three times the amount of jobs were created on average per month than the year before. So, getting rid of the carbon tax, getting rid of the mining tax, rolling out our record infrastructure investment program, signing three free trade agreements with South Korea, Japan and China. All of these things are helping to build a stronger more prosperous economy. Of course our important and necessary Budget repair effort is central to all of that. We had to make some difficult but necessary decisions and some of that has had an impact on our popularity of course, but that doesn’t mean that we should stop with the important task of reform. It means that we need to keep at it. 

DAVID LIPSON: Because some of your colleagues have been listening to some of that unpopularity if you like, from their electorates and their pretty nervous about it to the point where the Prime Minister has been calling backbenchers to try to settle their nerves. What’s your message to the backbench?

MATHIAS CORMANN: The Prime Minister talks to the backbench all the time. There is nothing unusual there. Our message is that we are on the right track. We are here at the beginning of 2015 in fundamentally a stronger position as a country than we were when we came into Government. 2015 is going to be a good year. We’re very optimistic about 2015 in terms of what it will bring for Australia, in terms of what it will mean for our Government. 

DAVID LIPSON: Since MYEFO late last year, we’ve seen some significant external factors potentially have an impact on the Budget. We’ve seen a plunge in the price of oil. We’ve also seen further signs of slowdown in China. How is all of that and other external factors going to impact on the Budget bottom line?

MATHIAS CORMANN: Ever since we delivered the Budget in May last year we’ve been facing some significant and unexpected additional global economic headwinds. The price for our iron ore dropped down to around $60, from a high only a few years ago of in excess of $180 a tonne. When 20 per cent of our export income comes from iron ore production, obviously that is going to have an impact. Then there is of course the price of oil which has been falling. That has had a beneficial impact for people at the petrol pump, but that does have an impact for some of our significant export businesses. That has an impact. But the important point here is David, that all of these external factors are really factors outside of our direct control. It means that it is so important that all of the things that are under our direct control are properly dealt with. That we make every post a winner. That we get ourselves back in a stronger, more resilient position when it comes to our Budget. That we ensure that we are as competitive internationally as possible, to grow a stronger, more prosperous economy. That is why we have been pursuing the abolition of those bad taxes that Labor had imposed on Australia, the carbon tax and the mining tax. That is why we’re so committed to ensure that we get Government spending back under control.

DAVID LIPSON: But it hasn’t been a great start in relation to that. You’ve had to sacrifice $1.5 billion in savings with the dumping of the $20 rebate cut for shorter GP consultations. Is the Government going to seek to get that money back? That $1.5 billion from the health space?

MATHIAS CORMANN: As at MYEFO, the Budget was about $40 billion better off over the forward estimates than it would have been under Labor because of the savings measures that Labor continues to oppose and the spending they want to restore from savings that were previously passed. We inherited a situation from Labor where they put Australia on a trajectory to $667 billion worth of debt and rising. They put us in a situation where we have to pay more than $1 billion a month in interest payments to service the debt that they have accumulated and rising moving forward. As a result of the decisions that we made in the Budget, we are able to bring Government debt down about around $170 billion over the next decade and falling further beyond that. We’ve got to keep at it. We’ve got to....  interrupted.

DAVID LIPSON: But just back to the question, just on the $1.5 billion will you seek to pull that back in from the health space? Is that money that you would expect as Finance Minister as part of the ERC and the Treasury team to actually be made up in other forms?

MATHIAS CORMANN: Our commitment in health is to protect Medicare for the long term. To ensure that vulnerable patients, concession card holders, continue to have access to bulk billed GP services. But that those of us that have a capacity to pay do make a small contribution in the form of a modest co-payment. The Health Minister, Sussan Ley has announced that she will engage in some further consultations with the AMA and other stakeholders. Let’s get that process to take its course. In the context of the next Budget, the Government will be making further decisions. 

DAVID LIPSON: Just on the general shape and position of the Budget, we heard Tony Abbott on radio yesterday say that Senate obstruction is such a concern that Australia is at risk of becoming a ‘second rate nation living on its luck’. Are things really that bad?

MATHIAS CORMANN: Labor put Australia on an unsustainable spending growth trajectory. At a time when we were confronted with falling revenue on the back of falling terms of trade, instead of constraining spending growth Labor locked in further permanent and significant spending increases in the period beyond the published forward estimates at the time of the last election. We can’t keep living on borrowed money. Some governments around the world in particular across Europe have tried that and it leads to very bad consequences. We don’t want that for Australia. We want ... interrupted 

DAVID LIPSON: Well the Shadow Treasurer Chris Bowen is now admitting that there is a Budget problem. Just in the past week he has said several times publicly that Labor would address the Budget issue. Potentially through higher taxes and spending cuts. Do you welcome him being so upfront this far out from the election? 

MATHIAS CORMANN: We’ve always said that under Labor there would be more new taxes. Labor would bring back the carbon tax. Labor would bring back the mining tax. Labor would no doubt increase taxes for Australians saving for their retirement. Our focus is on building a stronger economy so that we can increase revenue for Government on the back of stronger economic growth. Our focus is on getting spending under control, so we’ve got room for lower taxes into the future, to further strengthen economic growth moving forward. That will be the contrast between the Coalition and Labor at the next election.

DAVID LIPSON: But a few members of your own team are pushing for increases to the GST. What’s your view on that. 

MATHIAS CORMANN: We are at the beginning of a tax white paper review process. The Government has no plans to change the rate or the base of the GST. However, the Government, as we said we would do before the last election, is about to engage in a national conversation about how our tax system can be further improved. How we can ensure that lower, simpler, fairer taxes are collected in the most efficient, least economically distorting way possible. So that our tax system raises the necessary revenue for Government in a way that doesn’t detract from our economic growth potential. 

DAVID LIPSON: There’s been a lot of opposition and attention on a GST increase or a GST to cover for example fresh food. But can you tell us as Finance Minister, why are financial services exempt from the GST? 

MATHIAS CORMANN: Again, all of these matters are able to be addressed through the tax white paper review process. We said in the lead up to the last election, clearly and unequivocally, that in the first term of an Abbott Government there will be no change to the GST, full stop, end of story and we are sticking to that commitment. We are at the beginning of a process where all Australians are able to make suggestions on how our tax system can be improved, how our tax system can be made to work better, including how GST arrangements can be improved. But let me just make this point though, there will be no change to any GST arrangements unless there is a broad consensus across the community, unless there is a broad consensus across the Parliament and unless there is unanimous support from all of the State and Territory governments for that to happen, including State and Territory Labor governments. 

DAVID LIPSON: Christian Porter, a fellow Western Australian for you and also a former State treasurer, he’s...

MATHIAS CORMANN: A great man. 

DAVID LIPSON: ...supported calls for at least a discussion when it comes to increasing the GST. So you’re saying you welcome, at the very least a discussion in getting more tax dollars from the GST?

MATHIAS CORMANN: Let me make the point very clearly. The Government has absolutely no plan to increase either the rate or the base of the GST. We are at the beginning of a national conversation about how our tax system can be improved. How it can be made better. How we can have lower, simpler, fairer taxes that are collected in the most efficient, least economically distorting way possible. That will include a conversation about the GST, which is a central part of our tax system. However, we will not pursue any changes in this term of Government. Any changes that will be adopted, would be taken to the next election and we would not be pursuing any change whatsoever unless there is a broad consensus across the community and unless there is a broad consensus across the Federal Parliament and unless there is unanimous support from all of the State and Territory governments, including Labor State and Territory governments. 

DAVID LIPSON: Finance Minister, Mathias Cormann, great to have you back. Thanks for your time today.

MATHIAS CORMANN: Always good to be here.