Senator the Hon Mathias Cormann

FRAN KELLY: Mathias Cormann, welcome to Insiders.

MATHIAS CORMANN: Good morning.

FRAN KELLY: Minister, consumers aren’t spending, consumers aren’t saving, productivity is down, wages are stagnant, confidence is down. Do you think people at home watching feel or share your view that we’re actually doing OK?

MATHIAS CORMANN: The Australian economy continues to grow. We are in our 28th year of continuous growth, which is a longer period of uninterrupted growth than any other developed economy has been able to achieve… interrupted…

FRAN KELLY: It’s pretty slow growth. It’s the slowest in 10 years.

MATHIAS CORMANN: It is half a per cent growth in the June quarter in the context of a global economy which has been weakening on the back of escalating global trade tensions. We have to look at this in the broader context. You have countries, big trading nations like Germany and the UK going backwards. Singapore is delivering a negative quarter of growth. Yet the Australian economy continues to grow… interrupted…

FRAN KELLY: Just on that, and the Government has been making that comparison all week. Take Britain, it’s in the grip of Brexit. No wonder it’s not firing on all cylinders. Australia, on the other hand, is benefiting to some degree from the US-China trade tensions. The iron ore sales are up, that’s really boosted the coffers. We're improving the bottom line in this last year, not thanks to the Government's policies.

MATHIAS CORMANN: It is thanks to the Government's policy. We are working to a plan. We are a trading economy and there has been a pick-up in the resources sector, which has helped. There has been a stabilisation in the housing market, which has helped. But of course, and as the governor of the Reserve Bank also has made very clear, he also expects growth to strengthen moving forward on the back of lower interest rates and our income tax cuts. And indeed, the pick-up in the resources sector and also our exchange rate adjusting under our system with a floating exchange rate, which is also helping with our international competitiveness. But let's not kid ourselves. This is a pretty challenging global economic environment. We have been dealing with the impact of a significant flood and drought in the domestic context. All things considered, the fact that we continue to grow is an indication of the resilience of the Australian economy. Our employment growth is running at more than twice the rate across the OECD. We have employment growth of 2.6 per cent above the long-term trend of 1.8 per cent. We have a record participation rate… interrupted…

FRAN KELLY: We’ve got high underemployment and the unemployment rate isn’t going down like the Reserve Bank would want it to.

MATHIAS CORMANN: More Australians in work than ever. The 5.2 per cent unemployment rate is well below where it was headed when we came into Government. Of course, there is more work to be done. That is why we are implementing our plan to build a stronger economy, which includes more than $300 billion worth of income tax relief that we have legislated over the last two years, which came into effect from 1 July this year. About $15 billion worth of income tax refunds have been paid out since the legislation was passed by the Parliament in that first sitting week in July.

FRAN KELLY: And we’ll have to wait and see, I suppose, how much of that gets spent back into the economy. Early signs are, people weren't flooding out to the shops with the income tax cheques.

MATHIAS CORMANN: I think that that is a bit too premature. I've heard...interrupted…

FRAN KELLY: The July figures, the retail figures were down.

MATHIAS CORMANN: Jim Chalmers is always desperate to talk down the Australian economy, but let me tell you, it is quite premature to look at July retail figures to consider the impact of about $15 billion worth of income tax cuts... interrupted…

FRAN KELLY: Exactly, I said let’s wait and see. The Government has been talking about infrastructure, so has the Reserve Bank governor, who you mentioned earlier. The PM said this week that we're hitting our head on the ceiling in terms of capacity to build. The Reserve Bank governor has again this weekend, I’m quoting the Nine papers, saying “I think we can do more”. Is the Government again at odds with the Reserve Bank governor? We have record low borrowing rates. Why is the Government seemingly ignoring the advice of the Reserve Bank governor?

MATHIAS CORMANN: I completely reject that proposition. We are not at odds with the Reserve Bank governor. Monetary policy and fiscal policy is heading in the same direction… interrupted…

FRAN KELLY: Can we do more on infrastructure than we are doing now?

MATHIAS CORMANN: We are doing more on infrastructure. We have significantly boosted our infrastructure investment pipeline in our most recent budget. We have boosted it to $100 billion, about half of which is to roll out over the current forward estimates period. We have a very substantial infrastructure investment plan. And as the governor of the Reserve Bank has said on repeated occasions in the last month or two, he expects growth to strengthen into the future, including and in particular, because of the continuing high investment in infrastructure. I think there are sections of the media that are quite desperate to talk up what they perceive to be changes in emphasis between the Government and the Reserve Bank that are not actually there. There is a level of over interpretation happening here that quite frankly completely overreaches.

FRAN KELLY: Let me give you another quote from the Reserve Bank warning of downside risks including the fallout from the US-China trade war. If that trade war escalates, what more can the Government to do to protect the economy against those downside risks? And will you forego the surplus to do it?

MATHIAS CORMANN: Again, none of this is new. If you look at our budget papers… interrupted…

FRAN KELLY: No, my question is will you forego the surplus to do it?

MATHIAS CORMANN: If I may. You have asked a question, if I may answer it.This escalation in the US-China trade war, the global trade tensions, that is something that we knew about when we put our Budget together, delivered on 2 April... interrupted…

FRAN KELLY: But it’s got worse since then.

MATHIAS CORMANN: That is a downside risk that is also pointed to in our budget papers and our plan is actually framed to deal with all of these challenges that we are facing, to deal with the global economic headwinds that we are facing. That is why we have gone for another $158 billion worth of income tax relief. That is why we are boosting our infrastructure investment program… interrupted…

FRAN KELLY: So you won’t need to reassess it? Is that what you’re saying?

MATHIAS CORMANN: We are absolutely committed to our surplus. We are committed to making sure that government lives within its means. Labor, when they last were in government put the country on more than a decade of deficits and debt. This is a very important part of our plan to build a stronger economy, to ensure that the Government lives within its means. To ensure that future generations of Australians don't have to pay higher taxes to pay for our recurrent expenditure now. It is very important that we live within our means and that the funding for our essential services that Australians rely on is on a fiscally sustainable basis and trajectory for the future.

FRAN KELLY: Given the tepid rate of growth, given the headwinds we were just discussing, why won't the Government consider lifting Newstart? Even John Howard thinks you should lift Newstart. Is that just about the surplus too or is that something more punitive?

MATHIAS CORMANN: The Newstart allowance is increased twice a year by…interrupted…

FRAN KELLY: Tiny, fractional increases.

MATHIAS CORMANN: Newstart allowance is indexed twice a year, as it has been for the last 25 years under governments of both political persuasions. That is the indexation that is applied to the Newstart allowance. Newstart allowance is not a replacement wage. It is not an ongoing salary. This is meant to be transitional income support payment pending a return into employment… interrupted…

FRAN KELLY: Everyone understands that, but there has been pretty broad agreement across the business sector. As I said, even John Howard supports this, that it is too low.

MATHIAS CORMANN: In the lead-up to the last election, there were two alternative agendas and neither party promised to increase Newstart allowance. Labor went to the last election with $387 billion in higher taxes and not a single cent of that $387 billion in higher taxes was allocated to an increase in Newstart above the increase that happens twice a year.

FRAN KELLY: But the minister and the Prime Minister this week have just announced trying to re-introduce mandatory drug testing for welfare recipients instead. The Prime Minister says, quote, “Being on drugs stops you getting a job.” The BCA and ACOSS say that the low rate of Newstart is an impediment to getting a job, too. The Government’s not banking on that.

MATHIAS CORMANN: We believe that the rate of the Newstart allowance is appropriate. That is obviously the judgement that we made at the Budget. But we also believe that those Australians who are unemployed, who are on Newstart, and who have a drug addiction problem, that this drug addiction problem is a barrier to them getting back into the workforce. We are wanting to support and encourage Australians to deal with any barriers that they are facing in terms of getting back into the workforce. That is why we believe that through this drug testing trial, that we should assess whether there are better ways to channel Australians into treatment to help them get back into work.

FRAN KELLY: You believe that. There’s no evidence to support that though, is there, that it works?

MATHIAS CORMANN: Well we are running a trial to build up the evidence. We have run a trial in terms of the cashless debit card and the cashless debit card trials are proving to be highly successful in bringing down the youth unemployment rate in particular, in bringing down the level of expenditure on drugs and gambling and alcohol.

FRAN KELLY: Jacqui Lambie has just secured a deal with the Federal Government to waive Tasmania's $157 million housing debt. You're the Finance Minister. I imagine that you were involved in that. That was a deal struck in exchange for her vote for your tax cuts, the first round of tax cuts. Most of the other states have a housing debt, too. I think the total is around $2 billion. Will you waive those as well?

MATHIAS CORMANN: Firstly, Senator Lambie made very clear in that first week in July that she was supporting our income tax relief plan on its own merits. She voted in favour of our legislation on its own merits. I said at the time that obviously, we were aware that she felt very strongly about this issue, that we had committed to working with her and with the Tasmanian Government through that issue in good faith. The Tasmanian Government, indeed, the Hodgman Liberal Government had lobbied the Federal Government in relation to this particular issue for some time as well. And so on a bilateral basis between the Federal Government and the Tasmanian Government, we have been working through this issue over the last eight weeks or so. If other state governments around Australia want to approach us with a view of reaching an overall agreement in relation to matters that are important to them, we are of course open to discussing these matters with them.

FRAN KELLY: On this deal, $157 million to waive that debt for Tasmania in exchange for a vote on the tax cuts, Jacqui Lambie basically says today she came too cheap and she won't be so cheap next time. How much would you be prepared to do for Tasmania in return for her vote on repealing medivac or ensuring integrity?

MATHIAS CORMANN: Let me be very clear. We will always deal with any issue on its own merits. The income tax plan was something that was very much in Australia's national interest. It was in the interest of working families around Australia, in the interests of the economy and that is something that was legislated by the Parliament on its own merits. We have been engaging with Senator Lambie, as we said we would, in relation to the matter that you have now raised and we have made a judgement that based on all of the representations that we have received, that this was an appropriate thing to do. We will always consider very carefully on a case-by-case basis when representations are made to us whether they are appropriately supported and if they are consistent with the Government's priorities and with the Government's broader policy framework, then, of course, we will engage in relation to the matters as appropriate.

FRAN KELLY: And on the medivac repeal bill, you're the Leader of the Government in the Senate. Will the Government guarantee not to bring that bill in until the committee has done its work?

MATHIAS CORMANN: We don't have any plans of bringing this on this week. I have been reading some comments otherwise. That is not something that I am aware of.

FRAN KELLY: Finally, can I ask you in terms of the Tamil family that’s trying to avoid deportation to Sri Lanka. There's been a few leaks, apparently coming from the Government, suggesting that if this family drops its legal appeal and goes home, then they can reapply to return on some kind of regional visa. They won't have to pay the debts they’ve incurred around deportation. They won't have to wait a year to reapply. Kristina Keneally from Labor is calling on the Government to guarantee those terms. Will the Government guarantee that?

MATHIAS CORMANN: No. What the Prime Minister and Minister Dutton have said clearly, and which is what will apply in this circumstances, of course once they go back they can apply for a visa in the appropriate way through the appropriate process… interrupted…

FRAN KELLY: But they have to pay over a million dollars’ worth of deportation costs.

MATHIAS CORMANN: The law will apply to this family in the same way as it would apply to anybody else. You have to remember that there are about 1,500 Sri Lankans who were equally found not to be refugees, who have come here without a visa by boat, who have already been sent back. There is absolutely no reason why this family should be treated any different. It was none other than Anthony Albanese, who as Deputy Prime Minister in 2013 made the point that no one who arrives without a visa by boat will ever be settled here in Australia. That is what he said in 2013 after those two individuals at the time arrived from Sri Lanka without a visa by boat.

FRAN KELLY: Mathias Cormann, thank you very much for joining us on Insiders.

MATHIAS CORMANN: Always good to talk to you.