Senator the Hon Mathias Cormann

PETER VAN ONSELEN: I mentioned that our first guest this morning is Mathias Cormann, the Finance Minister. And as Paul was just talking about there as I mentioned off the top of the program, this inequality debate and in particular the tax treatment and the way that you go about dealing with whatever social disadvantage issues you might face in the economy is right front and centre. It always has been in a sense, irrespective of the words of Bill Shorten. We speak to the Finance Minister live out of WA now. I am talking about Senator Mathias Cormann. Thanks very much for your company.

MATHIAS CORMANN: Good to be here.

PETER VAN ONSELEN: Before we get to the issues around inequality and some of the other issues in your portfolio. I just wanted to ask you first up, our viewers on the East Coast might not be aware of this, but The Sunday Times, your local Sunday News Limited, well former News Limited paper over there, now owned by Seven West Media, it’s front page and we have got it up on screen now, says ‘you’re gone Mal’. It is referring to some Galaxy research that has been done just in WA, which highlights that as many as four or even five seats could be on the line and in trouble. It is long been a State Senator, your State that has been a Coalition, or a Liberal party stronghold. Are you worried about this polling?

MATHIAS CORMANN: If you look at the fine print, it actually says that our primary vote according to this poll would be about 39 per cent, which if that is true, that would be an eight per cent swing back to the WA Liberal party since the State election just a few months ago. If that figure is indeed right, you would say that we are heading in the right direction, but we have got more work to do. We understand that. 

PETER VAN ONSELEN: I have heard though, that the Liberal party’s own internal research showed something similar. Labor certainly when you talk to them, they are more than a little bullish about their hope of picking up seats. You have got to be concerned about some of the names that are in the mix that you could lose. I am thinking in particular of people like Christian Porter as a senior Cabinet Minister or an Andrew Hastie as somebody that conservatives, like yourself as a leading conservative, very much see as someone of the future for the party.

MATHIAS CORMANN: Bill Shorten, you are right, is getting quite cocky about his prospects at the next election. He is already measuring the curtains, the carpets and anything in between. As far as we are concerned, we continue to do the job for the Australian people. We continue to focus on making the Australian economy stronger, creating better opportunity for people to get ahead, making sure that Australians are safe and secure. I have great confidence in people like Christian Porter, Michael Keenan, Ken Wyatt and Andrew Hastie and all of my WA Liberal colleagues for that matter, to work hard between now and the next election and go to the next election with our track record and our plan for the future and to win again the confidence of a majority of people in their respective seats. 

PAUL KELLY: Minister, Malcolm Turnbull is about to get on a plane to go to Perth for a few days to campaign. What is the message that the Prime Minister needs to put out to Western Australia to improve the Government’s position there? 

MATHIAS CORMANN: The Prime Minister is coming to Western Australia with the whole Cabinet actually. We will be engaging with the community right across the State, talking about our plans for a stronger economy and more jobs. Talking about our plans to keep the country safe and secure and making the point that the high taxing, high spending agenda of the alternative, which has previously been rejected incidentally by West Australians at several occasions. Even when people on the Eastern seaboard were voting Labor, people in Western Australia resisted clearly the attempts by Labor to pursue high taxing, high spending agendas very successfully. We will continue to make the case that Western Australia’s future is best based on the strong growth agenda of the Coalition, not on the alternative.  

PAUL KELLY: Do you think that the Australian public is alarmed about the extent of inequality in the country? Bill Shorten says that this is now pervasive. Concerns about inequality are running virtually everywhere. What is the Government’s message to the Australian public about inequality? 

MATHIAS CORMANN: Bill Shorten tells lies. Bill Shorten believes that the politics of envy and class war will work for him personally politically. He hasn’t put forward any measure, any policy, any plan to create a single additional job to create a single inch of additional economic growth. Yes, there are challenges. We have come through a period of lower global economic growth. We are going through a period of rapid and disruptive technological change. There are parts of the community that are feeling the pressure and we very much understand this. But the worst thing we could do would be to adopt the high taxing politics of envy that Bill Shorten is putting forward. Bill Shorten knows that inequality has not increased since, as you have indicated just now and as you have pointed out in your piece on the weekend, inequality hasn’t actually increased since the global financial crisis. If anything, the situation has slightly improved. Overall, Australia is a very fair, egalitarian society. But we are dealing with global economic headwinds. The best thing for us to do is to ensure that Australia is in the strongest, most competitive position internationally possible, that we can continue to attract investment, improve productivity so that we can create the best possible opportunity for people across Australia to get ahead. That is why we are focused on making our tax system more growth friendly. That is why we are pursuing our agenda to bring down business tax rates in order to attract more investment, boost productivity, create more jobs and increase real wages over time. That is why we are pursuing an ambitious free trade agenda, getting better access for our exporting businesses to key markets around the world. That is why we are investing in productivity enhancing infrastructure to improve our economic prospects in the future. We understand, the Liberal National party Coalition understands, that for people across Australia to have the best possible opportunity to get ahead, the best possible opportunity to get a better and better paying job, we need to ensure that the businesses across Australia that employ them have the best possible opportunity to be successful. Labor, Bill Shorten, keeps wanting to increase the tax burden in the economy, which would hurt investment, damage growth and create less opportunity for people to get ahead. We want to create more opportunity for people to get ahead. 

PAUL KELLY: Now Bill Shorten is going to unveil a crackdown on trusts of some degree. We don’t know the details as yet. Does the Government have any plans at all to change the taxation arrangements in relation to trusts? Or will you stand by the status quo there.  

MATHIAS CORMANN: The answer to the first question is no we don’t. The answer to the second question is that we always ensure that the integrity of the tax system is maintained. To the extent that there are any issues that need to be addressed, we address them. Let me just say to the issues that have been raised in relation to trusts by Labor, we have not seen any of the detail. What I would say is that with Bill Shorten you cannot ever trust him just based on what he says. It will be very important for small businesses across Australia in particular, to see the detail. This is again another tax grab on top of all the other tax grabs that Bill Shorten has announced so far. Labor in government by their own admission would increase the overall tax burden in the economy. That will hurt investment, it will hurt growth, it will cost jobs, it is precisely the wrong way for Australia to go at this point in time. We need to ensure we put ourselves in a better, more competitive position, that we make our tax system more growth friendly, not less and that we put ourselves in a position where we can attract more investment and provide more incentive for people to stretch themselves, receive reward for effort and encourage people to stretch themselves so that all of us can have the best possible opportunity to get ahead. 

PETER VAN ONSELEN: But Senator, you say that you have got, in answer to Paul’s question, that you have got no plans for changes to trusts themselves. You have been very critical of what little we already know about plans that Labor might have. How can voters trust the Coalition on this? You said the same thing about super and you ended up making changes to super. 

MATHIAS CORMANN: You are quite wrong there actually Peter. Firstly, we said in the lead up to the 2013 Election that we would not make any unexpected adverse changes in our first term in Government. We did not. We then took a policy openly and transparently to the last election. We told the Australian people precisely what we would intend to do to put superannuation tax arrangements on a fairer, more sustainable foundation and trajectory for the future. We took a very clear policy to the election. People would say that was very courageous indeed. We won the election. We have since legislated the policy that we took to the last election. I completely reject that proposition that you just put there Peter. 

PETER VAN ONSELEN: But you say that there is no detail in terms of the trust crack down from the Opposition, but there is some detail …interrupted

MATHIAS CORMANN: Have you seen the detail? 

PETER VAN ONSELEN: Well there is some. 

MATHIAS CORMANN: Have you seen the detail?

PETER VAN ONSELEN: They say they will put a thirty per cent minimum tax rate for discretionary trust, it applies to people 18 and over who get a distribution. Farms and charities would be exempt. It will affect 315,000 trusts they say and will raise $4.1 billion over four years or $17.2 billion over ten. 

MATHIAS CORMANN: Peter, what I have seen is some selective leaking. I have not seen the release of a detailed policy with all of the underpinning assumptions. I think you will find that small businesses across Australia who are being targeted yet again by Bill Shorten with a tax hike. Because this is ultimately going to be a tax hike in particular on the many small businesses operators across Australia who use trust structures as a legitimate way of managing their financial affairs. They will want to see how Bill Shorten thinks he is going to be able to take $17 billion out of their pockets. Bill Shorten is going to try and create this impression that he can take $17 billion out of the economy but nobody is going to have to pay. Small business people across Australia will want to know where he is going to get that $17 billion, out of which pockets he is going to get those $17 billion. In the end small business already are facing higher company taxes under Bill Shorten and this is just another attack on them by Bill Shorten.  

PAUL KELLY: Labor Party hasn’t yet announced what they will do with the first stage of the corporate tax cut that was legislated for companies with a turnover of less than $50 million. How tenable would it be for Labor to repeal that as well as increasing the tax on trusts which of course affects the business sector. 

MATHIAS CORMANN: Labor keeps asserting the full amount from the corporate tax cuts as something that they will allocate to higher spending. You have to assume that Labor would in Government reverse the full company tax cuts that the Turnbull Government has put forward, three years of which we have already legislated and we remain committed to the full ten year plan. As far as I am aware, because Bill Shorten has already spent all of the money that he says would be able to be raised by higher company taxes, he has already spent all of that money and more. So at this stage small and medium sized businesses across Australia are looking at both a higher business tax rate plus this attack that Bill Shorten has flagged in relation to trusts. 

PAUL KELLY: What about the Government’s own tax policy? At the Australian Melbourne Institute Conference ten days ago prominent economist and former Reserve Bank board member Bob Gregory argued from his analysis that if you look at the Government’s Budget figures in terms of the projected return to surplus, the overwhelming amount of that, more than 90 per cent will be achieved through increases in personal income tax notably through fiscal drag. What is your response to that, Minister?

MATHIAS CORMANN: My response is that since we have been in Government and this has been the case for all four of our Budgets, they have in it a tax as a share of GDP cap. They have in it a cap that we imposed on ourselves of 23.9 per cent in terms of the overall tax burden in the economy. That 23.9 per cent tax as a share of GDP cap has been in our Budget since the 2014-15 Budget and it has remained the same. All of our revenue forecasts, including to the extent that revenue growth contributes to our return to surplus and staying in surplus over the medium term to 2027-28, all the way through, all of that is based on an in-built assumption that we will not allow taxes as a share of GDP to go past 23.9 per cent. Labor, by their own admission, is blowing that out of the water. Labor would increase the overall tax burden in the economy well beyond 23.9 per cent, which would hurt investment, hurt growth, hurt opportunity, which would cost jobs and which would lead to lower wages for people across Australia. There is no doubt about that. We have in the Budget, a tax as a share of GDP cap of 23.9 per cent. It has been the same cap in every single one of our Budgets. It is a cap that we remain committed to and our revenue forecasts are based on that cap being maintained. Labor has thrown that cap overboard. They are prepared to increase the overall tax burden in the economy which will be bad for the economy, bad for jobs, bad for people across Australia wanting to get ahead.

PETER VAN ONSELEN: We are talking to the Finance Minister as well as the Deputy Leader of the Government in the Senate, Mathias Cormann. We will continue doing so when we come back.

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Welcome back you are watching Sunday Agenda with Paul Kelly and I, we are talking to the Finance Minister, Mathias Cormann, a reminder we will be speaking to Anthony Albanese as well as Andrew Bragg a little later in the program. Senator Cormann, just getting back to some of the trust questions that we were discussing earlier, by trusts I mean family trusts, not your question marks about Bill Shorten’s trust. What do you think of this though, you say there are no plans to do anything in the family trust space, don’t you think that there is something in a fairness perspective wrong with the ability, through family trusts, for wealthy earning families to basically income split, to distribute money to some of their children and all the rest of it, to lower their overall tax burden, that is an advantage that only high-income families have.

MATHIAS CORMANN: Trust structures are predominantly not actually used for tax minimisation purposes, but for very legitimate, don’t take my word for it but Bill Shorten used to say that trusts are used for very legitimate management of financial affairs purposes. To the extent that there are integrity issues, these are matters that continuously are addressed. We do indeed have a Trust Integrity Taskforce within the ATO that deals with any integrity issues. The trust arrangements are an important feature of our overall tax system. They have served Australia well. They have provided flexibility, in particular to farmers and small business people. We are not proposing, unlike Bill Shorten, to increase the tax burden on hard working small business people across Australia the way he is.

PAUL KELLY: On the question of dual citizenship, Minister you were a citizen of Belgium. What were the steps that you took to correct that, to ensure that you did not have this problem as a Member of Parliament? And to what extent do you think that the Members of Parliament are to blame here? To the extent they have been caught out on this Constitutional provision.

MATHIAS CORMANN: I was born as a Belgian citizen. I came to Australia as a Belgian citizen. I have never been a dual citizen though. You ask what steps I took. The step I took was I took the pledge on Australia Day 2000 to become an Australian citizen. Under Belgian law, the voluntary acquisition of another citizenship, the Australian citizenship in my case, led to the immediate loss under Belgian citizenship law at the time of Belgian nationality. That is something that I confirmed again, formally, in the lead up to my original preselection. I approached the Belgian Embassy in Australia at the time to provide me with that confirmation. They did. Belgian law is quite black and white in relation to this, or it was at the time anyway. That was really the end of it. So I have never been a dual citizen myself. I was either a Belgian citizen and then from Australia Day 2000 I have been an Australian citizen only. Everyone has to manage their own affairs. I am not going to give gratuitous advice to colleagues in relation to their affairs.

PETER VAN ONSELEN: Well can I jump in there because others have been prepared to give gratuitous advice. Steve Ciobo before Matt Canavan found himself in a little bit of trouble had this to say about the Greens.

STEVE CIOBO [EXTRACT]: It is basically an unforgivable mistake. The situation where someone wouldn’t know they are a dual citizen, this is one of the basics of any competent political party, to run through these issues and all of us know that it is a Constitutional requirement. Frankly, doesn’t matter which political party you are in, if you haven’t done it, it is sloppy at the extreme.

PETER VAN ONSELEN: And Mathias Cormann, I wonder how consistent you think he was after Matt Canavan got himself into some trouble, this is what he then had to say.

STEVE CIOBO [EXTRACT]: Obviously, what has happened now with Matt is quite different to the situation we saw with The Greens Senators, we have got here, someone who has become a citizen unbeknownst to them, he didn’t sign any forms or receive any notification of any of that information. So it is very different, I mean are we going to ask that of every aspiring Member of Parliament, that they have to write to every single country on the planet and verify that they aren’t a citizen of that country? I mean this is what I am saying. I’m not sure if there is actually a full proof way of determine it.

PETER VAN ONSELEN: In fairness to both Steve Ciobo and Matt Canavan, I think that there are differences too just quietly. But this is probably why he should have taken the vow of silence on this issue in terms of judgements that you did Senator.

MATHIAS CORMANN: The thing is it is incumbent on all of us. We do sign a form in nominating for election to the Federal Parliament that we comply with Section 44 of the Constitution. Those of us who were born overseas, there is a bigger hint that we need to ensure that we comply in particular with the sole citizenship requirement. But having said that, in the end, there is only one authority in Australia that can provide conclusive and authoritative judgement in relation to these matters and that is the High Court.

PAUL KELLY: On the question of the republic, Minister, Bill Shorten announced last night that he would put a question in the form of a plebiscite, although he didn't use the word plebiscite, to the Australian people on the republic question at the end of a first term of a Shorten government. What's your response to this initiative from Bill Shorten?

MATHIAS CORMANN: What I would say again is that Bill Shorten wants to talk about everything and anything except how we can create more jobs in this country. Bill Shorten does not have a plan for the economy. He does not have a plan for jobs. In fact, what we have heard from him so far will damage the economy, will cost jobs, will hurt investment. Here he is just talking yet again about another topic that does not actually relate to how we can make our economy more successful in the future. The truth is that what Bill Shorten is proposing won't even lead to any outcome. It won't lead to any outcome. The difficult thing as we have found out in 1999, which was the last time people were asked about this, is not the question that he is proposing to ask, the more difficult threshold question is, well if you want to pursue a change and personally I am not in favour of change, I think the system that we have works very well, but if you want to pursue a change, what are you going to change to? He is not proposing any way forward there so quite frankly he's trying to distract from his lack of a plan for the economy and jobs. This is just another manifestation of it. 

PAUL KELLY: Now of course there is on the table the proposal for another Constitutional referendum, that is the indigenous recognition referendum which has been worked through now for a number of years. There's a final report to the Government from the Referendum Council. Is it your view that this referendum should be put during the life of the Turnbull Government?

MATHIAS CORMANN: This is not my judgement to make unilaterally. We are committed to the Constitutional referendum to achieve appropriate Indigenous recognition in our Constitution. We are committed to it. We want to put that in a way and at a time that maximises the opportunity for that referendum question to be carried. Let's see what comes back to us. There will no doubt be proper consideration of that through the normal processes of Government and more broadly through the Parliament at the right time. 

PAUL KELLY: The Prime Minister has charged you with this extra responsibility of developing Australia's relationship with Germany. I wonder if you could give us a rundown on what progress we've seen, the potential in terms of the bilateral relationship with Germany, where the opportunities lie, and also give us a rundown about this big Australia German conference which is scheduled for Perth later this year. 

MATHIAS CORMANN: Thank you very much. I am of German-speaking background and the Prime Minister has asked me to leverage my German-speaking background to broaden, deepen and strengthen the bilateral relationship with Germany. The context is that Germany is the fourth biggest economy in the world, it's the biggest economy in Europe, clearly a very substantial political power in Europe. Europe as a block continues to be our second biggest trading partner, our biggest source of foreign direct investment. So having a stronger, even better bilateral relationship with Germany is in our national interest. While we have a set of common and shared values and we are friendly, we have not probably spent as much time focussing on our relationship as we should have and as we could have. So a few years ago we took stock of the state of our bilateral relationship. We came up with about 59 odd recommendations on how it could be strengthened and further improved that went right across the board. From renegotiating a more modern double taxation agreement which facilitates strengthened investment and trade activity. We have now also initiated a regular, what is called, a 2+2 meeting of foreign and defence ministers of Australia and Germany to increase the level of strategic engagement. We have looked at ways that we can work better together on research and innovation collaboration. Germans are very good at translating high quality research and innovation into commercial success. These are areas that we would like to do some more work together on. We could do more work together into the Asia Pacific, which is why in Perth later this year in November, we will have a very significant business conference with up to a thousand delegates from Germany, Australia and across the Asia Pacific. The Foreign Minister of Singapore recently said he would come. We have got a whole range of senior business and political leaders from Germany and Australia participating, pursuing opportunities to do more business together so that both of us can be more successful. Finally, we are keen of course to finalise a European-Australia Free Trade Agreement. Germany is one of the very important champions of our efforts to achieve a European-Australian Free Trade Agreement and that is also something that will be further explored at that conference.

PETER VAN ONSELEN: I know Senator that The Australian newspaper will have a role in all of that. We'll be hoping to do a special edition of this program from Perth live in November to cover some of those events. Just finally before I let you go, our next guess is Anthony Albanese the Shadow Infrastructure spokesperson for the Labor party. My understanding when you look across the Forward Estimates and beyond over the ten years is that infrastructure spending actually dwindles rather than goes north, is that right?

MATHIAS CORMANN: You should not believe Labor's spin. If you look at our period in Government, on average, infrastructure spending has been about $2.1 billion higher on average per year. It was about $6 billion under Labor, it is about $8.1 billion on average per year under us. That is in terms of the actual infrastructure investment. We are also pursuing a range of measures to leverage additional investment into infrastructure including and in particular from the private sector, in partnership with the private sector. So we are providing historically unprecedented levels of infrastructure investment and high quality infrastructure investment to strengthen our economy and create more jobs.

PETER VAN ONSELEN: Senator Mathias Cormann, Finance Minister as well as Deputy Leader in the Senate, we appreciate your time as always on Agenda. Thanks very much.

MATHIAS CORMANN: Always good to talk to you.