Senator the Hon Mathias Cormann

KIERAN GILBERT: I am joined here in the studio by the Finance Minister and Leader of the Government in the Senate, Mathias Cormann. Now, that is obviously the industry’s view, but the broad public view would be supportive of this Labor move wouldn’t it?

MATHIAS CORMANN: Bill Shorten is being reckless and irresponsible and throwing away thousands and thousands of jobs. There is a scientific review underway, which was commissioned by the Minister David Littleproud, which is due to report in a few weeks’ time. It was not that long ago that Bill Shorten told everyone that we should wait for the outcomes of the review, which would be the responsible course of action. Now either he was rolled by his colleagues, or he is just being fickle and erratic as he usually is. Neither of those characteristics are the characteristics of somebody that Australians should want to lead their nation. I described Bill Shorten a few years ago as the wibble-wobble wibble-wobble jelly on a plate and this is just another example of this. He was for Kevin Rudd, then he was against him. He was for Julia Gillard, then he was against her. He was for company tax cuts, because he said they would deliver more investment, more jobs and higher wages, then he is strongly against company tax cuts. He was in favour of waiting for the review, now he is against waiting for the review. He is a very fickle character, who quite frankly does not have what it takes to be the leader of Australia.

KIERAN GILBERT: In his defence though, he indicated when he said await the review, he made it pretty clear that he did not think it would be sustainable. At that point he indicated a ban was likely.

MATHIAS CORMANN: There is no grey zone here. Either you wait for the review or you do not wait for the review. This is a very significant industry for Australia. The truth is, when it comes to live sheep exports, none of us like to see what we saw there and that must be stamped out. The truth is there is strong and strengthening international demand for live sheep and that is for a range of reasons, cultural and because in some of those countries they do not have the refrigeration arrangements…interrupted

KIERAN GILBERT: So it will be met one way or another?

MATHIAS CORMANN: This is my point. If Australia were to extract ourselves from this trade, somebody else will take it up. Somebody else who quite likely would have lesser animal welfare standards than Australia. We can try and put our head in the sand, Bill Shorten can try and put his head in the sand, but he would not actually achieve any animal welfare benefit from damaging farmers and damaging all of the workers across Australia who work in this supply chain, because the trade would continue, the demand for live sheep will continue. In fact it is strengthening as I say because for cultural reasons and because in some of those countries they do not have sufficient refrigeration arrangements to accept frozen meat.

KIERAN GILBERT: As I have asked you at the start, that might all be the case, but again it is likely to be a popular move because people were outraged by those images weren’t they, they were disgusting. 

MATHIAS CORMANN: I was outraged by those images, but politics is not just about doing what is popular at a particular point in time, it is about doing what is right and it is about demonstrating the leadership and the strength of character to be able to persist with doing what is right. Now what is right in this circumstance is to wait for the outcomes of the review. Which Bill Shorten agreed not that long ago was the right course of action, but either he was too weak to hold to the position that he knows to be right or he is just typically fickle, typically wibble, wobble jelly on a plate.

KIERAN GILBERT: One of the things that you have been speaking about for a long time now and I know that you have been referring to this limit on tax as a percentage of GDP of 23.9 per cent and indicating beyond that then taxes will be reduced. Can you respond to the criticism that has been levelled at the Government for using this number, some have accused you of just simply plucking it out of the air, 23.9 per cent as a percentage. Why is that the key figure?

MATHIAS CORMANN: It is a long-term average in terms of tax as a share of GDP. Again, this is just another example where Labor is incredibly fickle. Chris Bowen in his first Press Club speech as Shadow Treasurer actually said that we should have a limit of 23.7 per cent tax as a share of GDP that we should not go past. We have adopted 23.9 per cent, which has been a feature of our Budgets ever since our election in 2013. The reason is, there is a limit to how much money you can take out of the economy before you start damaging the economy, damaging investment, damaging jobs. Essentially, what we have determined is that the sensible speed limit when it comes to how much money we take out of the economy is 23.9 per cent and that is the boundary which sets how much we are ultimately able to spend. Labor is on track to increase the tax burden in the economy to close to 26 per cent. That will cost jobs. That will harm the economy, it will cost jobs. Labor seems to think that there is no limit to how much money you can take out of the economy without doing harm. Well that is not true. 23.9 per cent in revenue out of a bigger pie because the economy is growing more strongly, can deliver you more money than 26 per cent out of a shrinking pie, potentially.

KIERAN GILBERT: But you also suggested, I think as recently as the MYEFO, the Government that you are heading towards a surplus of one percent of GDP in the medium term, but the Treasurer and others in the Government have been a little reticent about re-committing to that.

MATHIAS CORMANN: Our fiscal strategy has been for some time to deliver a surplus as soon as possible and to get to a surplus of one per cent as a share of GDP as soon as possible…interrupted

KIERAN GILBERT: So they hasn’t changed?

MATHIAS CORMANN: Our fiscal strategy has not changed and there will be an update in the Budget next week in terms of how we are tracking and how we are performing. We have always said we want to get back into surplus as soon as possible and we want to get back into a surplus of one per cent as a share of GDP as soon as possible. Based on the forecast and projections in the most recent Budget update, we are on track to get back to surplus by 2020-21 and we are projected to remain in surplus all the way through the medium term. Now, there will be a further update to those numbers…interrupted

KIERAN GILBERT: Is it still important to get to one percent of GDP as a surplus?

MATHIAS CORMANN: That is part of our published fiscal strategy.

KIERAN GILBERT: In terms of the Government’s focus, will you prioritise tax cuts over debt reduction? Do you accept that that is the priority you are giving here?

MATHIAS CORMANN: We have got to do all of the above. We have to make sure that our tax arrangements remain competitive, that our tax arrangements continue to facilitate appropriately strong growth and job creation into the future. We have to make sure we get back into surplus as soon as possible. We need to make sure that we can pay off debt as soon as possible. We are focused on all of these things as well as making sure that we can guarantee funding for all of the important services provided by Government, which the Australian people expect.

KIERAN GILBERT: The polling shows, our poll earlier in the week, the ReachTel Sky News poll and then the Fin Review has got some numbers on the front page, Phillip Coorey reports today that again these numbers are consistent, more people want debt reduction than income tax cuts. 

MATHIAS CORMANN: If you look at even our most recent Budget update, the half-yearly Budget update, you will see that net debt is projected to peak as a share of GDP in next financial year before coming down and before coming down quite significantly. We are on a trajectory where not only are we getting the Budget back into surplus, but we are also projected to reduce debt over time.

KIERAN GILBERT: When you look at the company tax cuts, they gave in this JWS research, ten priorities, business tax cuts were the lowest in terms of support, just ten per cent support. When does it get to a point where you as the Finance Minister and the strongest advocate for these within the Government says enough is enough, you are going to spend it elsewhere.

MATHIAS CORMANN: I tell you what…interrupted

KIERAN GILBERT: Because you are booking at it as a zombie measure right now.

MATHIAS CORMANN: It is not a zombie measure. It is an incredibly important measure for our future economic prosperity and for the future opportunities of families around Australia to get ahead. I put my hand up to be part of the Government because I want to do the right thing by Australia, I want to do the right thing by our long term future. If we continue to disadvantage businesses in Australia by imposing higher taxes here than faced by their competitors in other parts of the world, we will lose investment and jobs to other parts of the world. The future job opportunities, the future job security, the future career opportunities, the future wage increases of nine out of ten working Australians working in a private sector business depend on the future success and profitability of the businesses that employ them. Right now, with the tax policy settings we have, we are putting those businesses at a disadvantage and that will come at a cost to working families around Australia.

KIERAN GILBERT: Is there still a chance of getting them through because right now big business, as you know, is on the nose via the Royal Commission.

MATHIAS CORMANN: Big business are the small businesses of yesteryear. We want small businesses of today to become the big businesses of tomorrow. The big businesses of today, not only do they employ many, many Australians directly themselves, they also employ indirectly many Australians effectively by purchasing products and services from small and medium sized business. In many ways, tax cuts for big business are the most important tax cuts of them all because they are the businesses that are most exposed on the front line of global competition to the advantages faced by their competitors, who are subject to significantly lower taxes. I was listening to Peter Strong yesterday from COSBOA, who made the very interesting point, even a generally high taxing nation like Sweden has a very low business tax rate of 22 per cent, because as a trading nation they understand that they cannot put their businesses, their exporting businesses and the businesses facing import competition at a competitive disadvantage…interrupted

KIERAN GILBERT: What about that data released yesterday from AlphaBeta, the former Kevin Rudd adviser Andrew Charlton runs that organisation. It showed that half of the tax cuts to businesses that had received the tax cuts that they looked at under $2 million, I think per annum, that they had moved it to growth, wage increase or investment in their business, 50 per cent was banked. Is that encouraging or are you concerned that more was not spent on wages?

MATHIAS CORMANN: This is early days for starters. What we see is that there was more investment, there were more jobs and over time you will get increases in wages on the back of more jobs. The reason is this, if businesses across Australia create more jobs, there is more competition for workers and businesses will be forced to pay more to secure the services of workers. Not because they want to. They are not charities. They are not paying more out of the goodness of their heart. They are paying more because that is what they must do. If we strengthen the economy, if we attract more investment, if we create an environment where businesses need to hire more people to continue to grow their business, there will be stronger competition for workers and stronger competition for workers means higher wages over time. That is what we need.

KIERAN GILBERT: A rare alliance on the front page of the Australian today, Simon Benson reports about this compact between the ACTU, Australian Industry Group and others wanting to keep migration at a 190,000 per annum, pushing back against some of the sentiment out of the Government. What is your reaction to that, do you welcome it?

MATHIAS CORMANN: We have made very clear we are not proposing to reduce that 190,000 number. But it is a ceiling, it is not a target. The key with migration always is to ensure we attract the right mix and to attract people to Australia who like the many generations of migrants that have come to Australia in the past, are committed to make a positive contribution to the future of our country.

KIERAN GILBERT: Do you feel some of the arguments have been xenophobic in terms of their motivation? That has been the view of some within the debate.

MATHIAS CORMANN: I am not a commentator. What I can say to you is that Australia is an amazing country where generation after generation of migrants from all corners of the world have come to Australia, made Australia their home, put their shoulder to the wheel and helped us be an even greater country. I think that in years to come, I would like to think that we can continue to be a highly attractive destination for people from around the world, who are prepared to come here and help us be the best possible country we can be.

KIERAN GILBERT: Last issues goes to education and the Catholic schools look like they are preparing for a fight. The Victorian diocese has been driving this, but now New South Wales, in fact every school diocese in that state joining the Victorians in warning about the impact on their schools if funding is not increased.

MATHIAS CORMANN: Funding for Catholic schools has increased, 3.7 per cent on average per year, per catholic student. This is another example of where Bill Shorten is incredibly fickle, wibble-wobble wibble-wobble jelly on a plate, because supposedly Bill Shorten and Labor are in favour of needs based schools funding, but then he turns around under a bit of pressure and he says let us have a special deal. The whole point was to get to the other side of special deals, not to make decisions based on political pressure to do special deals. But Bill Shorten does not seem to have the strength to do what is right in any area of public policy.

KIERAN GILBERT: If you do not comprise to some level in the wake of the review on the needs based funding, this is a powerful lobby isn’t it, every Catholic school around the country, potentially.

MATHIAS CORMANN: The job of Government is to assess all of the information, to make a decision about the appropriate way forward, to make a decision about what is right and the decision that we have made is that school funding should be allocated based on need and funding to Catholic schools continues to go up, continues to go up strongly. We let Bill Shorten run his politics.

KIERAN GILBERT: Mathias Cormann thanks very much ahead of a big week, the Budget week, thanks for that.