Senator the Hon Mathias Cormann

BARRIE CASSIDY: Now to our program guest, joining us from Perth this morning is the Minister for Finance Mathias Cormann. There were fresh questions this week about when the Budget would return to surplus.

CHRIS BOWEN [EXTRACT]: Why has the Treasurer today refused to confirm the Government's own Budget papers which show a return to surplus in 2020-21?

SCOTT MORRISON [EXTRACT]: Mr Speaker, what I said on ABC radio this morning is we will return to surplus when expenditure is less than revenue. That is what I said, Mr Speaker. You don't have to be a rocket scientist to work that out, Mr Speaker.

CHRIS BOWEN [EXTRACT]: Does the Treasurer take any responsibility for placing Australia's AAA rating at risk?

SCOTT MORRISON [EXTRACT]: The greatest guarantee that those opposite could give to the Australian people to support the AAA credit rating is to say that they will support the Government's Budget savings measures.

BARRIE CASSIDY: Mathias Cormann, thanks for joining us from the early hours in Perth.

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

BARRIE CASSIDY: It doesn't really help to say that the Budget will return to surplus when expenditure is less than revenue. I think that we can all figure that out.

MATHIAS CORMANN: That is true though. 

BARRIE CASSIDY: Of course it is true, yes. But is the target,  the 20-21 target still a valid one? 

MATHIAS CORMANN: In the May Budget that was when the Budget was predicted, forecast, to come back to surplus, 2020-21. The next update to our Budget numbers will be provided on 19 December in the half yearly Budget update. What we can say is, as we have done at every single Budget and every Budget update, the policy decisions of the Government will seek to improve the Budget bottom line. So far we have been able to achieve that. We are setting out to achieve that again in this half yearly Budget update. So we are improving the Budget bottom line as a result of the decisions that we are making, but there are always a whole range of external factors beyond any Government's control that we have got to factor in. 

BARRIE CASSIDY: But you're not improving the Budget bottom line, the nation's finances are now worse than they were when Tony Abbott and Joe Hockey ran the show. Far worse than when Rudd Gillard and Swan ran the show?

MATHIAS CORMANN:  Actually, the decisions that the Government has made since we came into Government have significantly improved the Budget bottom line. If we had not made decisions to reduce expenditure, if we had not made decisions on the revenue side, the Budget would now be in much worse shape. We are certainly in much better shape than we would have been if we had kept Labor's policy settings in place from 2013.  You have to remember, in the lead up to the last election, Labor by their own admission went to the election with policy settings that would have deteriorated the Budget bottom line over the forward estimates by $16.5 billion and that was after promoting more than $100 billion in additional taxes over the medium term. There is no doubt that under the Coalition the Budget is in better shape than it would have been under Labor. 

BARRIE CASSIDY: But you inherited a deficit of $19 billion. It is now somewhere between $37 and $40 billion and you claim that as a success. You're doing better than Labor.

MATHIAS CORMANN: Again, as I have indicated in my first answer, in any Budget there are things that are under the Government's control. The decisions that we make on expenditure are under our control and we are improving the Budget bottom line as a result of decisions on the spending side. What we are doing on the revenue side is under control in terms of policy settings. Since we have come into Government, global prices for key commodity exports out of Australia are much lower than what they were. No Government controls what happens to global prices for our key commodity exports. Global economic growth is lower than what was anticipated at the time. But if you look at what we have been able to achieve in Australia, we inherited a weakening economy, rising unemployment and a Budget position that was rapidly deteriorating. Today the economy is growing at 3.3 per cent, stronger than when we came into Government and stronger than any of the G7 economies. When we came into Government, Chris Bowen said that one of the markers of success or failure would be whether the unemployment rate would go past 6.25 per cent. Well it is at 5.6 per cent. There is no doubt that spending as a share of GDP is lower than where it would have been if we had kept Labor's policy settings in place. Under Labor we were on track to go to 26.5 per cent spending as a share of GDP. Now we are on track to reduce that over the current forward estimates.

BARRIE CASSIDY: Well I think people are entitled to measure your performance on the figures that you inherited rather than what you guess might have happened under a future Labor government.

MATHIAS CORMANN: We are not guessing anything. We are just noting that in any Budget and it is reported very clearly, we report very precisely what numbers are changing as a result of policy decisions. These are decisions of the Government… interrupted 

BARRIE CASSIDY: You must have a sense of that now. Your sense of that is that you won't reach surplus by 2020-21, you don't need to wait for December figures, you must have a sense of it now, that you won't reach that 20-21 target? 

MATHIAS CORMANN: Barrie, we are not making decisions based on a sense, we are making decisions based on hard information. The reason we are releasing the half yearly Budget update on 19 December is because on the second Wednesday in December, on 7 December, the national accounts for the third quarter, the September quarter will come in. That is important data which we will feed into our economic parameters and into revenue forecasts. By 19 December, we will be providing information to the Australian people as to what our expectations are in terms of our fiscal trajectory moving forward. 

BARRIE CASSIDY: Alright, let's look at the legislation, the week ahead and starting with the ABCC. That that will feed into economic growth if you can pull that off. 

MATHIAS CORMANN: Indeed.

BARRIE CASSIDY: Nick Xenophon is now saying that they want more water for SA and if he doesn't get what he wants, there will be no deal. Deal or no deal on the water for SA? 

MATHIAS CORMANN: We are committed to the national water plan as it has been legislated. We are always engaged in conversations with Nick Xenophon and indeed with Senators from right across the spectrum on how we can promote the national interest. The ABCC legislation, as you say would be very good for growth. If there is confidence by investors that infrastructure projects can be delivered on time and on budget, they will be prepared to invest more, creating more jobs, creating more infrastructure and indeed strengthening growth. The re-establishment of the Australian Building and Construction Commission is very important in its own right. But having said that, we are always engaged in good faith conversations with Senators from right across the board in order to implement our agenda. 

BARRIE CASSIDY: But Nick Xenophon will need to hear more I think than what he just heard from you. Because he wants 450 gigalitres of water and he doesn't want backtracking on that. Are you prepared to give him that? 

MATHIAS CORMANN: There is no backtracking by the Government. The Government is committed to the national water plan. We will continue to have all of these conversations with Nick Xenophon. Consistent with established practice, I don't think it is useful for us to have conversations with Nick Xenophon through the media, even if it is through a distinguished program like Insiders. 

BARRIE CASSIDY: Alright, well what about the other issue, the backpackers tax. Are you prepared to say that you will compromise on that and perhaps Pauline Hanson has found the appropriate figure at 15 per cent? 

MATHIAS CORMANN: Well we have compromised on that. Right now, the tax rate that applies to foreign workers, to non-resident foreign workers from the first dollar earned is 32.5 per cent. We have proposed to reduce that down to 19 per cent, which puts Australia in a very competitive position internationally when it comes to attracting foreign workers to Australia to do these sorts of jobs. The truth is that Labor wants to provide a further tax cut to foreign workers and at the same time as they are pushing for higher taxes for Australian business, higher taxes for Australians saving for retirement. We don't believe it is appropriate to cut taxes for foreign workers by even more. Labor wants to … interrupted 

BARRIE CASSIDY: It is not about a tax cut for foreign workers, it is about helping farmers find workers.

MATHIAS CORMANN: It is absolutely about a tax cut for foreign workers. It was Wayne Swan who set the tax rate for foreign workers from the first dollar earned at 32.5 per cent. We are proposing to reduce it to 19 per cent. If that legislation is not … interrupted 

BARRIE CASSIDY: Why is that not a tax cut for foreign workers, from 32 to 19, it is a tax cut? 

MATHIAS CORMANN: What we are saying is, we are compromising, as I have said to you before, we are compromising by taking it down to 19 per cent. That is as much as is required to make the tax rate internationally competitive. That puts foreign workers coming to Australia, who are working on our fruit yards and the like, picking fruit and the like, that puts them in a better position than if they would do the same job and earn the same money in New Zealand, the United Kingdom or Canada. It puts us into an internationally competitive situation. But we are not prepared to cut that tax for foreign workers by even more. 

BARRIE CASSIDY: But it is 10.5 per cent in New Zealand.

MATHIAS CORMANN: You have to take all sorts of different things into account. The value of the dollar. There are various factors that come into it. If you look at what is actually available to people by way of take home pay after they have earned a certain amount of money, you will find that in Australia it is a competitive arrangement. 

BARRIE CASSIDY: Alright, so there will be no backing down from 19 per cent, no compromising?

MATHIAS CORMANN: We believe that we have compromised as far as we can sensibly compromise, given that the Budget bottom line cannot afford a further tax cut beyond what it is that we have put on the table. You have got to remember that we are all focused on preserving our AAA credit rating. We are all focussed on and getting the Budget back into surplus as soon as possible. If we were to provide a bigger tax cut to foreign workers, then we would have to recoup that either by higher taxes on Australians or by deeper cuts on the spending side in Australia. We don't believe that that is appropriate. 

BARRIE CASSIDY: I want to ask you about the Attorney-General George Brandis's handling of the Bell Group matter. It does seems that the Attorney-General wanted the WA Government to leapfrog other creditors and he wasn't about to let the Solicitor-General get in his way. Is that a fair interpretation of what happened?

MATHIAS CORMANN: I don't believe that is a fair interpretation at all. The truth is I am not aware of all of the ins and outs of any involvement that the Attorney-General may have had in this matter. I am aware obviously of the Bell Group matter, which is one of the sad legacy issues of Labor's infamous and shameful WA Inc era. It has been going since 1991. I am aware that the Government here in Western Australia, instead of continuing to spend more millions and millions of dollars on lawyers' fees, was focused on finding a way to bring this issue to a conclusion. But I am not aware of the things that you have just said. 

BARRIE CASSIDY: But isn't it true though, that the Federal Government wanted the West Australian Government to be at the top of the list of creditors?

MATHIAS CORMANN: No, that is not true. That is absolutely not true. 

BARRIE CASSIDY: What is not true about that? 

MATHIAS CORMANN: What is not true about that is that, we want to ensure, well the West Australian Government wanted to ensure and certainly the Australian Government was aware, through the Treasurer Joe Hockey, that there was an attempt to bring this issue to a close in a way that was fair to all creditors.

BARRIE CASSIDY: But Western Australia was the top of the list, you had advice from the Solicitor-General to say that that he had advice that that breached the Constitution?

MATHIAS CORMANN: Well Barrie, you might have seen advice from the Solicitor-General. I haven't seen advice from the Solicitor-General. So I don't know what you are talking about to be honest.

BARRIE CASSIDY: Was it in anyway related to the GST that this was in some way the Federal Government trying to compensate WA for a loss of GST funding?

MATHIAS CORMANN: Barrie, given your line of questioning, let me tell you the only thing I am aware of. The only thing that I am aware of, is that the State Government in Western Australia wrote to the Treasurer advising him that they were proposing to make laws in the Corporations Law space, using provisions in the Federal Corporations Act which enabled States who had referred Corporations Law powers to make such laws. The Federal Government, through Joe Hockey at the time, acknowledged the fact that Western Australia was able to use the relevant provisions in the Corporations Act to that effect. That is the only knowledge that I have in relation to any of these matters. Let me just say again, that the context at the time was to ensure that now that the decision had been made in relation to the liquidation of the Bell Group and that there was an amount of money to be distributed, that this would be done fairly and without spending hundreds of millions of dollars on legal fees, as has been the case so far. I am not aware of any of the other matters that you think that you seem to be aware of.

BARRIE CASSIDY: Alright, I just want to run a short grab of the former Prime Minister Tony Abbott who was on Sky this morning and was talking about the need for the Government to sharpen its message. 

TONY ABBOTT [EXTRACT]: It is good that we're no longer talking about innovation and agility because that frankly loses people. We have to got to talk about the issues that they understand. We have got to put it in terms of their interests and how we are going to advance their interests. 

BARRIE CASSIDY: Is it good to no longer talk about innovation, is that something the public can't keep up with? 

MATHIAS CORMANN: I think that innovation and agility is a very important part of our economic plan. For an open trading economy like Australia it is critically important that we are innovative and agile and always able to be as competitive as we possibly can be internationally. It is only one part of an overall plan. Our focus on making the tax system more growth friendly is an important part of our plan. Our focus on our ambitious infrastructure investment program, our focus on our  ambitious export trade deal agenda, there is a whole range of components to our plan to make the economy stronger. But innovation and being agile continues to be a very important part of that. 

BARRIE CASSIDY: And just finally, with the death of Fidel Castro, how do you see him, a revolutionary, a tyrant? How did you see it?

MATHIAS CORMANN: He is obviously a significant figure, historical figure, of the 20th century. But he was also a very controversial figure. The policies and the actions he pursued, in our judgement, were not in the best interests of the Cuban people. Certainly his hostility to the West in particular the United States, we believe imposed significant hardship on the Cuban people. 

BARRIE CASSIDY: Mathias Cormann, thanks for your time this morning. 

MATHIAS CORMANN: Always good to talk to you.