Senator the Hon Mathias Cormann

NANCY HUNGERFORD: I am pleased to say that I am joined by the Australian Finance Minister, that is Mr Mathias Cormann with me. Pleasure to speak to you. Thank you for joining CNBC. As President Trump landed here in Osaka last night, he met with the Australians first. You were part of that dinner with President Trump and the Australian delegation, can you give us your impressions of his mood, did he give you any indications of whether or not he is ready to come to a deal with Chinese President Xi Jinping?

MATHIAS CORMANN: We had a very warm and friendly discussion with President Trump and his senior team. We did talk about the global economy, trade, trade between our two countries and trade more generally. We made it very clear that from our point of view, we are very keen to see an ongoing commitment to free trade and open engagement and for any issues to be resolved through a negotiated outcome.

NANCY HUNGERFORD: And of course Australia faces the concern of being somewhat caught in the middle here, the growth implications of what is happening in China can have implications for Australia too. So when you expressed those concerns to President Trump, did he say don’t worry, I have got it taken care of?

MATHIAS CORMANN: Australia is an open trading economy. What happens in the world economy does matter to us, but it matters to a lot of other countries too. It matters to all countries here at the G20. We would argue that an ongoing and protracted trade war is not in anybody’s interest. It is not in the interest of the US. It is not in the interest of China. It is certainly not in the interests of Australia. So, we are very keen to see a negotiated resolution within the WTO framework and one that does not impose any unfair consequences on other parties.

NANCY HUNGERFORD: There are the trade tensions under discussion between China and the US, but also the issues of technology that have really kind of moved to the forefront here and Australia was a leader in many ways in preventing Huawei equipment from being used in your own 5G rollout. Did you discuss 5G issues with the President as well because we understand that is a big part of the push here too, that he wants other ally countries to stand by them in the concerns around Huawei.

MATHIAS CORMANN: I am not going to go into the specifics of the conversations, but the Australian decisions in relation to these matters are a matter of public record. We made decisions based on our assessment of our national interest as we respect that other friends and allies and other countries around the world will make their decisions based on their considerations.

NANCY HUNGERFORD: Do you worry that we get to a point though were essentially countries have to choose between two systems, a bifurcation if you a will, with the US driven west and a China driven east and what that could mean for Australia’s economy?

MATHIAS CORMANN: I do not believe so. We certainly do not want to be in that position. We have a very important economic relationship both with the US and with China. We have a long standing strategic friendship and relationship with the US. We want to maintain good, positive, strong relationships, economic relationships with both the US and China and I think most countries around the world would be the same.

NANCY HUNGERFORD: As these tensions play out on the global stage, it does appear as though the perception among Australians has changed somewhat, or weakened if you will regarding their perceptions of China. A recent Lowy Institute study I saw did refer to the trust that Australians report with regard to China has hit a near 15-year low. How does the Government view this relationship? Do you trust China today as a reliable trade and business partner?

MATHIAS CORMANN: Our relationship with China is very important to us. It is our most important two-way trading relationship and we will continue to do what we can to ensure that the relationship is positive moving forward. 

NANCY HUNGERFORD: And what is the impact overall, not just on what is a resource heavy sector for you across Australia, but the economy at a time when many are already worried about signs of a slow down?

MATHIAS CORMANN: There are global economic headwinds, which is why at a domestic level in Australia we need to ensure that all of our policy settings are right to make us as competitive as possible internationally so we can be as resilient as possible to deal with headwinds, but also to take advantage of opportunities in our neighbourhood. In the end, across the Asia Pacific, is where most of the global economic growth will be generated over the next few decades. Australia wants to be in the best possible position to seize those opportunities, but yes, we always have to deal with issues.

NANCY HUNGERFORD: It does seem as though your central bank too is trying to step up and offset some of these headwinds that are out there. Many are expecting another rate cut from the RBA next week. Does this concern you though with rates already at a record low that the central bank could perhaps run out ammunition if we get to another crisis?

MATHIAS CORMANN: The Reserve Bank needs to make these judgements independently based on the information in front of them, but the Government is doing its bit. We are very much pursuing a pro-growth agenda, including through legislating to deliver more income tax relief for hardworking Australians. $158 billion worth of income tax relief going before the Parliament next week after we legislated $144 billion worth of tax cuts last year. So more than $300 billion in tax cuts. 

NANCY HUNGERFORD: Are you confident that you will get those tax cuts passed next week?

MATHIAS CORMANN: We will give it our absolute best shot.

NANCY HUNGERFORD: And would you consider perhaps a different phasing out of the tranches and the income level of the tax cuts…interrupted

MATHIAS CORMANN: No.

NANCY HUNGERFORD: ….to see a more clear passage.

MATHIAS CORMANN: We very clearly designed our plan on the basis of prioritising tax cuts to low and middle income earners, before addressing bracket creep and providing tax relief to all other working Australians. We a phasing it in in a way that is affordable within the Budget, which means that our Budget can remain in surplus at the same time as increasing expenditure on hospitals and schools and so on. This is a very carefully calibrated plan and we will be putting it to the Parliament in its current form. 

NANCY HUNGERFORD: Yet there are still critics out there who say they are not as convinced that the tax cuts will keep the revenue source sound, there are concerns about the revenue side. What do you say to that?

MATHIAS CORMANN: There are always critics. We have assessed all of the economic and fiscal information. We have considered all of the advice. We have a tax as a share of GDP cap in place at 23.9 per cent as a share of GDP, which we have committed to remain below. That is why we need to continue to provide tax relief when the revenue flows would take us above that.

NANCY HUNGERFORD: When you talk about Australia as an open economy that is so dependent on this international trade flows, it does seem as though there is a question of reliability of this international system here at the G20, it is not just about the US and China, it is more about securing this rules based, international system that many see under threat at the moment. Do you think we can do that here at the G20 in this communicate, does it need to have more oomph so to speak than in previous communicates?

MATHIAS CORMANN: I think that overwhelmingly countries around the world understand that open markets and free trade have helped deliver higher living standards for people all around the world. Yes, from time to time, there are pressures to be dealt with and there are reforms to be pursued, but fundamentally, we need to maintain our commitment to open markets and free trade as the best way to provide prosperity, stability and peace for people around the world.

NANCY HUNGERFORD: Mathias Cormann it has been an absolute pleasure speaking to you, thank you for taking the time on CNBC today.