Senator the Hon Mathias Cormann

PATRICIA KARVELAS: The Prime Minister has been talking tax today, cutting it for small business but not for big. The 1.5 per cent company tax cut won’t go ahead, but big business will no longer be hit with a levy to pay for its Paid Parental Leave Scheme that has now been dumped, but small business still can expect a tax cut from July. Meanwhile there are figures out today which show consumer confidence has fallen sharply on the back of the drop in iron ore prices. Joining us now to discuss tax and preparations for the Budget and I know he is really knee-deep in them, is Federal Finance Minister Mathias Cormann. Welcome to the programme.

MATHIAS CORMANN: Good evening Patricia.

PATRICIA KARVELAS: ‘Knee-deep’, good description of what is happening in your life?

MATHIAS CORMANN: We are certainly spending a lot of time in Expenditure Review Committee meetings looking right across Government on the best way to put the Budget together to strengthen the economy, create more jobs and be on a stronger foundation for the future.

PATRICIA KARVELAS: Let me put a specific question to you. The Chamber of Commerce and Industry says that multi-nationals will seriously consider moving offshore following the news you will abandon this promised cut to company tax. That would be a disaster for Australian jobs, wouldn’t it?

MATHIAS CORMANN: We hope that they might consider it but not act on it. The truth is we would like to be able to do more, but in the economic and fiscal conditions we are in, a 1.5 per cent tax cut for small business is what we can do at this time as part of a broader strategy to strengthen growth and create more jobs. 

PATRICIA KARVELAS: Did you receive advice from Treasury that this could be a consequence?  That if you did dump the company tax cut for big business that this would be something that they would consider? Is it just something that ACCI is mentioning? I’m trying to figure out how real this threat is.

MATHIAS CORMANN: We consider all sorts of issues when we make judgements and our judgement is that in the current circumstances for Australia and the current circumstances in terms of the Budget, the best thing we can do to strengthen economic growth, to strengthen opportunity is to target the tax cut opportunity towards small business, the engine room of our economy. Once our Budget is in a stronger position, we will revisit what is possible, but I might just hasten to add here that as you also said in your introduction, we are not proceeding with the 1.5 per cent Paid Parental Leave Levy, which was going to be targeted at Australia’s 3000-odd biggest businesses.

PATRICIA KARVELAS: On RN Drive, my guest is Mathias Cormann the Finance Minister, our number if you would like to text us is 0418 226 576. Do you think it is a good idea to not go ahead with this company tax cut? Perhaps you think it is a reasonable decision the Government has made, text us on 0418 226 576. Now you are making much of the small business cuts but what detail do we have, the Australian Industry Group says that it very much depends on the detail as to what kind of impact it will have. What are the facts?

MATHIAS CORMANN: The detail will be released over the next few weeks. At the moment we are as you quite rightly point out, putting the Budget together. We are making judgements on what is affordable, what is desirable, what are the most appropriate priorities to put Australia on a stronger foundation for the future. Over the coming weeks, more detail will be released as it becomes available.

PATRICIA KARVELAS: Now the Prime Minister talked about collapsing iron ore prices, seeing a $30billion cut in Government revenue over 4 years. Is that a new figure? Are you putting it out there to try and convince the Senate crossbenches to pass legislation that has been held up in the Senate that you have been unable to get through? Things like the deregulation of higher education fees.

MATHIAS CORMANN: It is objectively a matter of fact that the iron ore price has been collapsing. Iron ore exports are our biggest export. More than 21 per cent of our export income comes from iron ore. The iron ore price peaked at $180 a tonne. When we came into Government it was at $120 a tonne and it is now down to about $45 a tonne. So there has been a massive fall in iron ore prices, which has of course flowed through to our revenue given how important iron ore is as an overall export earner. That is something that is outside of our direct control. We don’t influence what happens to global commodity prices, so we have to make judgements in that context on how best to put Australia in the most resilient position to deal with those challenges and in the strongest possible position to take advantage of other opportunities as they become available. 

PATRICIA KARVELAS: I am deeply interested in finding out what exactly your family childcare package might look like. Now I know that you are not going to tell me, you’re not going to reveal details, but what I am really interested in is you previously said there would be quite a serious package that the Prime Minister has said that parents will have more money in their pockets which is a pretty specific promise really, but now you are saying that any of these childcare initiatives will be dependent on the passage of unpopular bills or on savings. What savings exactly does this childcare package depend on? I thought it was just a package that we could rely on regardless of what else happens

MATHIAS CORMANN: Well the numbers have to add up. We are committed to helping families by making sure they can have access to more affordable, high-quality childcare. That is an important part of our strategy to strengthen economic growth, because it will help us lift workforce participation. What we have said all the way through is that any spending on higher priority areas will have to be offset by savings on comparatively lower priority areas and I guess our message to the Labor Party and our message to the Senate is that if you agree with us that we need to do more to help families access affordable, high-quality childcare, then you have got to work with us in passing some of those savings that are currently stuck in the Senate and you have got to work with us in passing some of these savings that we will be bringing forward in the Budget to pay for it.

PATRICIA KARVELAS: Okay let me give you a scenario Mathias Cormann, they say well actually we don’t like your Bills’ still and we don’t want to support them, what happens to parents wanting childcare relief?

MATHIAS CORMANN: That is a conversation that is yet to play out in the Senate so let’s not pre-empt where that might take us. But very clearly, we want to do more. We the Government want to do more to help families access affordable, high-quality childcare. We have got to be able to pay for it. In order to pay for it, we have to pass savings and it will be up to the Parliament as to whether they work with us.

PATRICIA KARVELAS: I have many friends who are young mothers who are desperately hoping that your childcare package might make it a bit easier for them to participate in work.

MATHIAS CORMANN: Well what I would suggest to you is that you get all of your friends to ring their local Labor member of parliament and encourage them to work with us on passing savings that are currently stuck in the parliament so we can pay for access to more affordable, high quality childcare.

PATRICIA KARVELAS: So you’re saying to parents out there waiting for this package that you will deliver the package in the Budget but you may not be able to legislate the package unless you can offset it with savings.

MATHIAS CORMANN: Well we will deliver the package and we’re committed to delivering on it but yes, in order to spend more in one area we need to save in other areas. It will have to be dealt with as a holistic package indeed.

PATRICIA KARVELAS: So again, I just want to check, if you can’t get the savings are you prepared to not go forward with the childcare package if you can’t secure the saving?  If you find that the Senate just won’t help you?

MATHIAS CORMANN: Well we’re absolutely committed to the package, but the only way we can deliver the package is if we can deliver the savings. That'll be a matter for the Senate to consider and for the Senate to pass judgement on it. What we would say to the Labor Party and to every party represented in the Senate, if you want to work with us to help families get access to more affordable, high quality childcare because that’s good for families and that’s good for the economy then you’ve got to work with us on passing some of those savings that are blocked in the Senate and some of the savings that we will be putting forward as part of this Budget.

PATRICIA KARVELAS: On RN Drive my guest is Federal Finance Minister, Mathias Cormann. I’ve got this text message that I really want to put to you, Mathias Cormann, because it’s an interesting claim. It’s a claim, only a claim. The ACCI is exaggerating multi-nationals don’t pay much tax in Australia, a fractional change to not much is even less significant. Is that true?

MATHIAS CORMANN: I would be very surprised if any multi-national would decide to leave Australia on the back of the announcement that was made today. Obviously we had to make a judgement on what was affordable, what is affordable. What is desirable right now is the 1.5 percent tax cut for small business. That is what we believe will give us the biggest bang for our buck in terms of strengthening economic growth and creating more jobs. Multi-nationals will always make their own judgements but Australia is a very attractive investment destination, it is a very attractive place to do business and I’d be very surprised if multi-nationals would leave Australia on the basis of that. In particular, given we have also announced that we’re not proceeding with the 1.5 percent Paid Parental Leave Levy.

PATRICIA KARVELAS: Now on the GST, and you’re a West Australian so I would really like, and you’re the Finance Minister, so your view on this is pretty crucial. Reports continue that your Government is examining a freeze in the GST formula so Western Australia is not so hard hit. Can you confirm that freeze will happen?

MATHIAS CORMANN: Well the leaders are meeting on Friday so let’s see what the leaders come up with. There is no doubt that there is an issue for Western Australia, which in my judgement needs to be addressed in the national interest. It is not a parochial matter just for Western Australia. The GST was always designed to be a growth revenue, a reliable growth revenue for the states, but in Western Australia there have been successive cuts over several years now. It is one thing for that to happen when other revenues are growing, but not now. The Commonwealth Grants Commission has recommended another 16.2 percent cut next year at a time when the other major revenue for Western Australia related to iron ore is in free-fall. Western Australia’ is on track to get less than 30 percent of their GST back. That is a pretty difficult position for them. The Federal Government is sympathetic but we also recognise it is a matter for the states. It is a state revenue and on Friday they all get together and they should come up with a sensible way forward.

PATRICIA KARVELAS: What about a federal loan to the WA Government? You and the Prime Minister and others keep referring to WA needing to privatise public assets like electricity. Are you talking to WA about making any assistance conditional on state privatisation?

MATHIAS CORMANN: Just taking things separately at the moment, I certainly have some regular conversations with the State Government in Western Australia, with the Treasurer and others and it is certainly true that at various times I have expressed a view and the Treasurer has expressed a view and others in the Federal Government have expressed a view that there is an opportunity for Western Australia to do more when it comes to economic reform, micro-economic reform in Western Australia. For example, Western Australia still owns a TAB business. No other state in Australia owns a TAB business. There is absolutely no policy argument in favour of Western Australia owning a TAB business and I guess the point that I would make in that context is that if Western Australia was more ambitious and had more of a sense of urgency in terms of the sale of such assets, they could then access the Federal Asset Recycling Fund to help boost investment in their productivity enhancing infrastructure. So there’s a lot of money that is currently left on the table by Western Australia out of Canberra that they could access if they were, in my view, a bit more proactive when it comes to economic reform.

PATRICIA KARVELAS: And finally, a last question on this East West Road Link which today we’ve heard has been scrapped and the compensation amount has been revealed by the Victorian Government. Now Labor said it was a blighted contract, it was full with poison pills, had a terrible cost-benefit-analysis and was signed in the dying days of the previous Coalition Government and it shouldn’t have been. Are you still committed to spending the money in Victoria.

MATHIAS CORMANN: We’re committed to absolutely spending the money in Victoria on the East West Link, on an important infrastructure project…interrupted

PATRICIA KARVELAS: But the East-West Link has been, there’s been a deal that’s been done, given this Victorian Government which was actually elected on a platform of getting rid of the East-West Link you’ve got to say.

MATHIAS CORMANN: And they decided to waste $340 million of taxpayer's money for nothing to show for it.

PATRICIA KARVELAS: And if they do, they look like they’re going forward with it, there’s not much sort of grey there. What will you do?

MATHIAS CORMANN: The Federal Government remains committed to the East West Link. It is a very important infrastructure project for Victoria and the money remains available for whatever government in Victoria in the future will work with us to make it happen. In the meantime, of course we will work with the elected Government in Victoria in relation to infrastructure projects in Victoria but as far as the Budget allocation for the East-West Link is concerned, we will be preserving that so it can be appropriately deployed for what is a very important productivity enhancing infrastructure project for Victoria.

PATRICIA KARVELAS: Mathias Cormann, thank you for interrupting all of kind of, stuck in Budget meetings, I can’t wait to see your Budget. Thank you for joining us on the program.

MATHIAS CORMANN: Always good to talk to you.

PATRICIA KARVELAS: I do love the Budget. That’s Federal Finance Minister, Mathias Cormann.