Senator the Hon Mathias Cormann

FRAN KELLY: Well the Turnbull Government has been getting down to some serious policy business, yesterday announcing a raft of changes to the financial sector, covering banking, superannuation, innovation and financial planning. And later today, it will introduce legislation watering down its unpopular changes to family tax benefits, which have been basically stranded in the Senate, since they were first proposed in that first Abbott-Hockey Budget in 2014. In a moment we will be joined by Senate crossbencher Glenn Lazarus, but first the Finance Minister Mathias Cormann is in our Parliament House studios, Minister good morning welcome back to Breakfast.

MATHIAS CORMANN: Good morning Fran. Good to be here. 

FRAN KELLY: On the Murray Inquiry Minister, the big picture changes, the tougher capital climate for the banks. Have you crunched the numbers and worked out how much this is going to push up retail interest rates? 

MATHIAS CORMANN: Our focus in responding to the Murray Inquiry has been on how best to ensure that our financial system is efficient but also resilient, that it is competitive but also safe. These are all judgements on balance. We want to ensure that the financial system as a facilitator, a key facilitator in the economy, will help drive productivity and growth. By the same token it is very important, in particular in the current global economic context, that our financial system is appropriately resilient. 

FRAN KELLY: I’m sure that you’ve talked to the banks in the lead up to this. We’ve already seen Westpac last week announce a lift in home loan interest rates up by 0.2 per cent from next month. If the other banks do follow in the wake of your announcements for the tougher capital requirements, will the Government criticise them for that? 

MATHIAS CORMANN: Firstly, of course we have consulted with the banks in putting our response together, as the Murray Inquiry consulted with the banks and all other relevant stakeholders as it was putting its recommendations to Government together. What I would say though is that the decision made by Westpac and announced last week was very much a commercial decision for them. All of the advice available to the Government is that the extent of the increase in the interest rate that Westpac actually applied to its relevant home mortgage rates was beyond what was required to deal with the additional capital requirements imposed by APRA. The reality is this is a competitive market. What we would say to bank customers, to customers of Westpac or any other bank that decides to lift its costs for consumers beyond what is appropriate, is to shop around, to look at what other banks in the market have to offer.

FRAN KELLY: Okay, the Government will progressively ban credit card surcharges above the reasonable cost faced by merchants. That was an announcement yesterday. It will be popular. If retailers recoup these fees by increasing prices instead, is the change still worthwhile, given it will make pricing more transparent?

MATHIAS CORMANN: What we want is to ensure that any additional charges imposed on customers are fair. If it is a matter of recouping actual costs incurred then that is obviously appropriate. What we’ve been seeing in the market, what consumers have been seeing in the market is that quite a number of retailers actually use the opportunity of that credit card surcharge to impose costs well beyond what was required to recoup the costs of actually managing the transaction through a credit card. 

FRAN KELLY: So how do we know what is required Minister, what is that reasonable cost, is there a clear number?

MATHIAS CORMANN: There is a clear indication for retailers as to how much it is that they have to pay to transact a payment through a credit card. What we would say is, and we will be giving some powers to the Australian Consumer and Competition Commission in order to monitor this in the market, but we will legislate to prevent any business from imposing a surcharge that goes beyond actually recouping the actual costs incurred. If retailers or if any business wants to increase the cost of a good or service that they provide that is a matter for them and that will resolve itself through the competitive forces in the market. What we have a concern about and what we think is unfair is when under the guise of recouping costs for credit card transactions, consumers are being slugged with essentially hidden fees. 

FRAN KELLY: That’s it isn’t it, we don’t know what the cost is. For instance, Jetstar charges a flat $8.50 credit card fee. The airlines all charge these fees. There are a lot of complaints, consumer complaints about it. If you’ve got a cheap flight, $75 from Sydney to Melbourne, that $8.50 would amount to an 11.3 per cent charge. If it was a $250 flight it would be a 3.4 per cent charge. That’s more than recouping the costs owed to the credit card company.   

MATHIAS CORMANN: This is what we are saying. We don’t think it is fair to use the guise of a credit card transaction to impose additional costs. Pricing is a matter for each individual business, but it is important that the pricing is transparent and that people understand how much it is that a business actually charges for a particular product or a particular service. Beyond that if there is a cost that is incurred because a payment is transacted through a credit card rather than in cash, then it is appropriate to recoup that cost, but not any more than that.

FRAN KELLY: So in other words if that is part of the airlines business model, if Jetstar loses say 10 per cent in the fees that they were charging on their credit cards, then the fares are likely to go up by that amount. That is what we can expect?

MATHIAS CORMANN: That is a judgement for them. What we are saying is that it is important that whatever prices are charged, it is important that the information is made available openly and transparently to consumers so that they can make a judgement on who they want to choose to travel with when it comes to air travel or who they want to choose to purchase a particular product or service from given the prices, the charge for a particular product.

FRAN KELLY: You are listening to RN Breakfast, it is eighteen to eight, our guest is the Federal Finance Minister Mathias Cormann. On another policy front Minister, the Government is proposing to water down, we understand, the cuts to the family tax benefits. For example, the age at which Family Tax Benefits Part B would cut out will rise from the six years of age, which was proposed in the 2014 Budget, to the age of 13. If you do this, will you have the numbers to pass the legislation in the Senate, finally?

MATHIAS CORMANN: The Treasurer, in his former capacity as Minister for Social Services, has been negotiating with the crossbench in the Senate for some time about a revised Families Package. Our intention, our focus, very much is to pay for the better, more affordable, more flexible access to childcare services for families that we have committed ourselves to, and the changes to the family tax benefit arrangements are a part of that. There will be some announcement very soon about a revised approach. Christian Porter, in coming on into the role as the Social Services Minister, has continued the work that had been initiated by Scott Morrison some time ago. As with all things, when we put something to the Parliament our intention and our aspiration is to see it pass the Parliament.

FRAN KELLY: So it is going to be introduced today I understand. So as the Deputy Leader of the Government in the Senate presumably, you are aware of the likelihood of, if it going to pass or not, well let’s assume it is, negotiations with the crossbenches have been underway for the last few weeks. Did it take a change of Prime Minister to get this significant compromise?

MATHIAS CORMANN: Firstly, I don’t ever take anything for granted when it comes to passing legislation through the Senate. Secondly, over the past year we have been able to pass a whole range of reforms through …interrupted

FRAN KELLY: But not this one.

MATHIAS CORMANN: This one was always going to be the next cab of the rank. Scott Morrison as Social Services Minister had been in discussion with the crossbench for some time. We are getting to the pointy end now. We have said for some time now that our next challenge was to get a revised Families Package through the Parliament, which has got two components to it. It has got some savings in order to pay for additional support for families to get into work, stay in work and by being able to access a better, more affordable, more flexible childcare arrangements.

FRAN KELLY: If it goes through in the terms we understand, the Government won’t recoup as nearly as much as it had budgeted for. Will you have enough money made from the changes as they stand or as they get negotiated, to still pay for the $3.5 billion you need for the childcare package?

MATHIAS CORMANN: The intention with all things is to ensure that any change in approach is Budget neutral. We will be providing an update on all of the moving parts in the Budget in our half yearly Budget update in December in the Mid-Year Economic and Fiscal Outlook.

FRAN KELLY: Minister, another Bill stranded in the Senate is the cut to paid parental leave to stop what the Government has called the double-dipping by new parents who have got employer schemes and then receive the taxpayer parental payments, are you also reworking the paid parental leave scheme with the crossbenchers in an effort to get those changes through? Or some changes through?

MATHIAS CORMANN: This is very much an issue that is in the area of responsibility for Christian Porter as the Social Services Minister. I am sure he is very focused on getting all of the legislation through, all of the measures through, that are still unresolved that are in our last Budget or in the Budget before that for that matter.

FRAN KELLY: So is the Government still committed to that change, to end what you call the double dipping?

MATHIAS CORMANN: We are committed to continuing to work to put our social services budget on a sustainable foundation for the future, to put our Budget overall on a sustainable economic and fiscal foundation for the future. We are always all ears. We are always prepared to engage with constructive and positive and sensible contributors on all sides of the Parliament. So our focus is on getting the best possible reform through the Parliament. I am sure that Christian Porter is working on that as we speak.

FRAN KELLY: Can I ask you finally, Joe Hockey leaves the Parliament today. You and he were both famously photographed after preparing that tough and as it turns out, unpopular 2014 Budget. You were smoking cigars outside, only one of you paid the price for that Budget and that image. Was Joe Hockey hard done by in your view?

MATHIAS CORMANN: Joe Hockey is a very good friend. It will be sad to see him leave the Parliament. He has made an outstanding contribution to public life, nearly 20 years in the Parliament, 17 years of service on the Coalition frontbench, including nearly a decade, or a bit more than a decade as a Minister. I’ll be sad to see him go, but by the same token I’m very excited for him and his family about what lies ahead for them. I wish him all the best.

FRAN KELLY: Mathias Cormann, thank you very much for joining us.

MATHIAS CORMANN: Always good to talk to you.