Senator the Hon Mathias Cormann

JANINE PERRETT: First let’s go to Perth where we are joined by the Finance Minister, Senator Mathias Cormann, welcome back to the show Senator Cormann.

MATHIAS CORMANN: Good to be back.

JANINE PERRETT: You have certainly caused a ruckus this week. I will talk to you about some of the new news a bit later on, but first given that you tried to bring the argument back to economics this week I am going to start with that. With the simple question, do you really believe that the leader of the Australian Labor party is a socialist?

MATHIAS CORMANN: I don’t know what Bill Shorten is. What I do know is that he is pursuing a socialist rhetoric and that he is pushing a damaging socialist agenda, which would hurt our economy and leave all Australians worse off. I have been quite intrigued how the Labor party seems to be taking offence at being described as socialist. Their own constitution describes the Australian Labor party as a socialist party. It has been interesting to see. What I am concerned about is that Bill Shorten has been getting increasingly shrill in sneering at millionaires, sneering at Australians that have been successful. Presumably because he wants to send a message that in his view they have done something wrong. When really if we want the Australian economy to be as successful as it possibly can be we rely on individual Australians trying hard, working hard and doing the best they can, stretch themselves. A political system based on policies supporting the free market, reward for effort, encouraging people to stretch themselves, with a social safety net, policies encouraging equality of opportunity is what we need. Not policies trying to achieve equality of outcome. It is a very important conversation for Australia to have.   

JANINE PERRETT: Okay, but you mentioned the word shrill, your own Prime Minister has been quite shrill about Bill Shorten regularly. He has virtually accused him in the Australian vernacular of being a brown-noser to billionaires. Too close to business. Quaffing Crystal with the big end of town. Many people have said how does that portrayal that he is making of Bill Shorten equate with this Che Guevara in a suit as Nick O’Malley said, anti-capitalist socialist? There are two messages there. Completely different about him.  

MATHIAS CORMANN: You look at what Bill Shorten has been saying of late. He is trying to exploit for his own political purposes and in the pursuit of his own personal political success, the anxiety across sections of our community that it is the result of lower global growth, rapid and disruptive technological change, geopolitical dynamics and the like. Sections of the community are anxious and clearly Bill Shorten is seeking to exploit this for his own purposes. But he is doing so by putting forward an agenda that would actually leave in particular, low and middle income earners worse off. Because, if I can explain that, a stronger more successful economy is most important to low and middle income earners because they demonstrably will do better in terms of better job opportunities, better job security, higher incomes on the back of higher workforce participation and the opportunity to work more hours and get a better job if the economy is more successful. The only way that the economy is going to be more successful, or as successful as it possibly can be, is if we encourage all individual Australians to be the best they can be, to try hard and to absolutely stretch themselves to reach their full potential. Socialism, policies seeking to achieve equality of outcome rather than equality of opportunity demonstrably leads to inferior outcomes. It makes everyone poorer as a result. 

JANINE PERRETT: But you have had a lot of criticism from political commentators who think that you are sounding a bit like Bronwyn Bishop. She is always talking about reds under the beds and socialism. As Bernard Keane in Crikey wrote and the reason he was disappointed was because you are meant to the grown up amongst the all the people who go off piste. You obviously spent a lot of time doing this speech. Is it because of your European roots that you were closer to socialism, that you think that we are more blasé here in Australia. The most left wing leader we have had in the Labor party I guess goes back to Whitlam. Tell us the story behind why you felt the need to make that speech.  

MATHIAS CORMANN: The first thing is that Australia has been extremely successful. We have gone through a period of 26 years of continuous growth and we are the country of the fair go. I believe that Australia overall has got the balance right between pursuing pro-growth, pro-success policies while at the same time making sure that we do have an appropriately generous and well targeted safety net. What I would say is that the Hawke and Keating legacy in particular, Labor Prime Ministers, was to embrace the free market with a social safety net to open the Australian economy up to global competition. To make us a genuinely open trading economy. I think … interrupted 

JANINE PERRETT: Okay, but...

MATHIAS CORMANN: If I may finish. I think that Bill Shorten is trashing that legacy. It would, if he was allowed to implement it as Prime Minister, it would leave us worse off. All of us. Why is this an issue that I have picked up? When I was a second year law student I happened to be in Berlin two weeks after the Wall came down. It is certainly an event that has had a significant impact on my political outlook. Because what I saw was how different political values and principles and systems can have a massive impact on peoples' quality of life and their living standards. Because in Germany, in East Berlin, in Berlin overall, after the Second World War, you had people who started in the same position, the same challenges, same opportunities, same climate, same everything. It is the ultimate case study over a forty year period. At the beginning people would not have realised that they were on different trajectories. But on one side you had the free market, reward for effort, encouraging people to stretch themselves, a social safety net. That led to very high living standards. On the other side, you had socialism, the lowest common denominator … interrupted 

JANINE PERRETT: Well they weren't just socialists, they were communists, weren't they?

MATHIAS CORMANN: Let me tell you that they pursued policies of seeking to achieve equality of outcome. They were an extreme version of socialism. But people say that the reason, I heard this morning David Marr on Insiders say that the reason that East Germany was bad and East Berlin was bad was because they were a police state. They became a police state because people did not like to live in a socialist country. They could see across the border people having higher living standards and better opportunity. Whereas of course the only way they could keep people under control, ultimately, over an extended period, was by building a wall after 12 years of a socialist system. Then, eventually, even that was not enough to hold people back. 

JANINE PERRETT: Well it is interesting you mention Hawke-Keating, because also in the speech you talk about the fact that, if Shorten was elected, people would be jumping on planes to flee the country. I can go back a little bit further even than you. I can tell you I covered the 1983 election, when Bob Hawke was elected. I can tell you that the Coalition scare campaign, the business attitude, that Bob Hawke, a leader of the ACTU, a man they thought was as close to a socialist as you could get, was going to destroy this country. Many of them claimed they were leaving. The fear campaign about Bob Hawke obviously bore no resemblance to reality when he got in. So I find it interesting that you now hold up the Hawke-Keating Government as an example of great free market. 

MATHIAS CORMANN: Look at what the Hawke and Keating Governments did. They lowered company taxes in order to make Australia more competitive internationally and attract more investment … interrupted 

JANINE PERRETT: But that was after they got in, Senator Cormann. There was a lot of fear about Bob Hawke, all his history was as ACTU leader, he was extremely left wing.

MATHIAS CORMANN: Janine are you suggesting that, if only Bill Shorten can get in, all of a sudden he would promote lower company taxes? If that is his position, he should say so now … interrupted 

JANINE PERRETT: Well your Prime Minister says that he is closer to big business than Bob Hawke was.

MATHIAS CORMANN: No no, but the thing is, if he is in favour of lower company taxes as you seem to be suggesting, then he should say so now.

JANINE PERRETT: I did not suggest that.

MATHIAS CORMANN: I do not know, to be frank I do not know what you are suggesting.

JANINE PERRETT: I am just saying that people perceive people to be left wing or right wing. But look …

MATHIAS CORMANN: No, well let's pick up on this. Here we have Bill Shorten sneering at millionaires, trying to create the impression that he wants to target millionaires … interrupted

JANINE PERRETT: I thought he was sucking up to them?

MATHIAS CORMANN: No, can I finish, can I finish one sentence please?

JANINE PERRETT: Yeah, okay.

MATHIAS CORMANN: So here we have Bill Shorten sneering at millionaires, suggesting that he is going to target them with higher taxes. When actually he is proposing to increase the income tax for anyone earning more than $180,000 to nearly 50 per cent on an ongoing basis. He is going after middle income earners in terms of his changes to negative gearing. He is going after small business and low income earners, in particular, would be very heavily hit in terms of his proposed changes to trusts. Wherever you look, he is going after the workers, the savers, the homeowners, small business. He is going after the aspirational middle class of Australia. What I am saying to you is that if we want to be as successful as we possibly can be, we need to encourage success, we need to encourage people trying harder, rather than to penalise and punish them for being successful when they finally get there. 

JANINE PERRETT: Okay well, you note that 18 per cent of voters were born after the Berlin Wall, so that basically the younger generation does not understand the negative side of socialism, or has not seen it. Yet we have seen around the world that the youth vote is embracing people like Jeremy Corbyn and Bernie Sanders, because of this message of income inequality which you point out, Bill Shorten is on that bandwagon. But what you did not mention in the speech was a key reason that they believe in that and that is because of slow wages growth. Now, your side of politics also agrees this is a problem. Now, if wages are stagnant and people are going backwards and yet company profits are going up, they see corporate salaries going up, you can understand why the message appeals. 

MATHIAS CORMANN: I understand that we have a serious challenge here to ensure that people remember that socialism leads to inferior outcomes and makes everyone poorer. That is why … interrupted 

JANINE PERRETT: Well, so do stagnant wages. 

MATHIAS CORMANN: The thing is that you always have to look at what the counter factual is. I would put it to you that if you have less success, if you have got fewer people trying hard and the economy grows more slowly, the people that will be hit the hardest and disproportionately hit the hardest, will be low and middle income earners, because their job will be at risk, in a general sense will be at risk sooner. When you look at the impact on incomes at the low and middle income end, lower growth will hurt lower income earners disproportionately more. You do not have to go back to East Berlin. There are recent socialists in Europe that have tried this socialist experiment. Francois Hollande who after just one term did not even recontest the election. He came in introducing a 75 per cent income tax rate on anyone earning more than a million Euros. That is about $1.5 million Australian. The message that they can afford it, why wouldn't we charge 75 per cent. 

JANINE PERRETT: And that was a failure? 

MATHIAS CORMANN: What happened was it didn't raise any money. All of the people in that income category ran for the border. They went to Belgium. One of them, Gerard Depardieu, even went to Russia to avoid the high income tax in France. The point is, do you really want to chase your successful people out of the country. 75 per cent is very extreme. But they applied that to people earning more than a million Euros.  

JANINE PERRETT: I can understand the French comparison, that's a fair comparison or even Eastern European.

MATHIAS CORMANN: The rhetoric of Bill Shorten is precisely the same.

JANINE PERRETT: I think that's a fair comparison talking about that. That's recent history but today your colleague, Dan Tehan went a step further than you. He's claiming now that Bill Shorten is such socialist we're going to turn into Cuba. Do you think that that scare campaign, that it's just getting a bit ridiculous. On what basis are we going to turn into Cuba? Is it North Korea next week? 

MATHIAS CORMANN: Let me put it to you this way, we need an Australian Government that encourages success, that encourages people to do the best they can be, to try hard, to work hard and to reach their full potential. Our Government is focused on encouraging people to do their best, to be their best. Whereas Bill Shorten actually wants to make it harder for people to be successful, wants to make it harder ultimately for our economy overall to be successful. You tell me one single policy he has got to promote growth? 

JANINE PERRETT: You didn't mention Cuba there, do you think that's a bit of a stretch?

MATHIAS CORMANN: I have not seen the comments that Dan has made, but Dan is an outstanding Minister. 

JANINE PERRETT: What about China then? China is a communist country but many of your colleagues think we should, you know, emulate their economy.  

MATHIAS CORMANN: I do not know who is suggesting that. I am really surprised by you saying that we should be socialists.

JANINE PERRETT: No I don't, I don't agree, I want to you to point it out. So you don't agree. China definitely communist. Communist bad.

MATHIAS CORMANN: This is a very serious issue Janine. This is about two sets of policy approaches. On one side you have Bill Shorten pursing the politics of envy, seeking to tear one group of Australians down in an effort to create an impression by those people that are doing it tough that they are going to be better off if only those successful people are torn down. On the other side, you have our approach, which is designed to encourage aspiration, encourage opportunity, drive stronger growth overall so that everyone has got a better chance to get ahead. 

JANINE PERRETT: I will ask you one example there that doesn't fit into that rhetoric. You say even in there that you don't tear down certain groups, you talk about the importance of, basically the capitalist system over socialism and yet you, your Government had brought in a tax on banks purely because they are profitable and unpopular. How does a tax on profitable banks for no valid reason, just that they can afford it, how does that fit in? That sounds awfully socialistic to me. 

MATHIAS CORMANN: Let me make one very important point upfront. So in every Budget that we have had, we have imposed a cap on ourselves, a tax as a share of GDP cap of 23.9 per cent. That means that we will not be increasing the tax burden in the economy above 23.9 per cent. All of Labor's announcements, more than $150 billion worth of additional taxes, will blow that cap out of the water and will increase the overall tax burden in the economy. That will hurt growth, it will hurt jobs and it will lead to fewer jobs and lower wages. We are not increasing the overall tax burden. Your question goes to how … interrupted 

JANINE PERRETT: But you are targeting a certain group.

MATHIAS CORMANN: Your question goes to how the revenue is raised. I am happy to explain why the bank levy is justified. That is, as we've said at the time of the Budget, in Australia because of our market structure, in particular the four major banks are more profitable, more dominant and more profitable, on the back of our market structure and regulatory protections. In the circumstances we are facing as a nation, the fiscal circumstances we are facing as a nation, we believe it was appropriate for them to make a small and proportionate contribution to our Budget repair effort. The truth is …interrupted 

JANINE PERRETT: That is not unlike what Labor says.

MATHIAS CORMANN: That is not right. That is actually not right. 

JANINE PERRETT: Labor is saying that they believe people who can afford it should make a contribution. 

MATHIAS CORMANN: Labor is going after the middle class. Labor is going after the nurses and police officers with their housing tax. 

JANINE PERRETT: So banks are alright, just not the lower class? 

MATHIAS CORMANN: Labor is going after Australians earning more than $180,000 a year. Proposing that they should pay nearly 50 per cent of tax on a permanent basis.

JANINE PERRETT: I want to get on to a couple of other quick things then. On that basis when we are talking about this Corbyn message and why it is attractive, the Bernie Sanders. Does Ahmed Fahour’s $10.8 million pay packet as a public servant basically, is that the kind of thing that only helps Bill Shorten? 

MATHIAS CORMANN: His pay packet was actually negotiated when Labor was in government. We are on the record as saying that it is inappropriate. We have taken steps to ensure that the arrangements put in place for the new managing director of Australia Post are more appropriate. 

JANINE PERRETT: Is much less okay. Just another issue and we are talking about political factions, it is not just socialism versus capitalism or left versus right, as in Liberal and Labor. You have factions in your own party and there is a factional fight on your hands in WA at the moment. The Liberal State Conference is on next Saturday. One of the debates is going to be the introduction of democratic reform. Julie Bishop has come out in favour according to the press this weekend. What is your position, whether all local members or just a few delegates should get to choose candidates in WA, because this has been a hot button issue here in New South Wales. WA is the standout. You are seen as the obstacle to democratic reform, what do you say to that? 

MATHIAS CORMANN: You should not believe everything you read in the newspaper Janine. That is the first point. The second point is that these are matters for the Liberal party organisation. The third point I would make is that Western Australia has a proud track record of pre-selecting outstanding candidates both at a Federal and at a State level. Finally, we actually for a long time have had a partial plebiscite system in place. We have got the best of both worlds. We have about 30 per cent of the pre-selection body made up of members at large in a particular electorate. But we also have delegates from branches, and divisions and State Council …interrupted 

JANINE PERRETT: So are you saying you are prepared to stick with the current system, because part of the criticism is that one of your staffers Slade Brockman just got the Senate seat. Are you saying that the system works well, because some people are hoping you are going to support democratic reform next week. Are you going to change your position at all. Can you give us a hint? 

MATHIAS CORMANN: Janine, I am not going to talk about internal Party matters on your program with the greatest of respect to you. What I would say to you, Slade Brockman is an outstanding individual who will do an outstanding job as a Senator for Western Australia. He has a great rural policy pedigree in particular. He worked for a very long time for the Pastoralists and Graziers Association. He has a very strong rural background. He is one of the many outstanding people alongside Michael Keenan, Michaelia Cash, Christian Porter, Julie Bishop and Linda Reynolds and others. We have preselected outstanding people to represent the great State of Western Australia in Canberra. That is very much my view. 

JANINE PERRETT: Okay, we will watch this week. Have to ask you this, were you disappointed to see Tony Abbott come out and admit that he was too drunk to vote on the GFC, something very close to your heart. You have talked about that stimulus vote many times over the years. Are you disappointed he was too drunk to vote? 

MATHIAS CORMANN: Janine, that is ancient history. I am focused on the future. I am focused on making sure that Australia continues to be a successful country for many years and decades to come.  

JANINE PERRETT: Okay all this and the citizenship issue, that is not your fault. It is nothing you are doing, you try and stay on message. But how frustrating is it, you are heading back to Parliament Monday week, that all these things like citizenship are diverting from your agenda. How hard is it? 

MATHIAS CORMANN: A number of Members of Parliament have been referred by the Parliament to the High Court to consider their circumstance in relation to citizenship. That process will take its course. There will be an outcome on the other side of it. We are very confident based on the legal advice that we have got, that the members of the Government are going to be fine, that they are not in breach of section 44 of the Constitution. But that is a matter now for the High Court to determine. 

JANINE PERRETT: So back to work and everything is going to be fine?

MATHIAS CORMANN: Janine every single day we do the best we can to put Australia on the strongest possible economic and fiscal foundation and trajectory for the future. That is what I will continue to do for as long as I have the opportunity to do this job. 

JANINE PERRETT: Thank you very much. Always a pleasure to talk to you. Thank you Senator Mathias Cormann. 

MATHIAS CORMANN: Always good to talk to you.