Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
DAVID SPEERS: Someone who knows what the figures are but I suspect will not be telling us exactly what they are is the Finance Minister Mathias Cormann. A week out from the Budget, thank you very much for joining us.
MATHIAS CORMANN: Good to be here.
DAVID SPEERS: Unless you do feel like confirming any of the deficit numbers for us, but I assume that you are not going to. Let me ask you this, good debt and bad debt, the Treasurer has been talking about it. What is good debt?
MATHIAS CORMANN: If we borrow in order to invest in productivity enhancing, economy enhancing infrastructure; that is good debt. The situation that we inherited from the previous government which we have been seeking to address is where we have to borrow to pay for our day to day living expenses, our operating expenses if you like. We have got to get back into a situation as soon as possible where we can pay our own way when it comes to our day to day living expenses. But to borrow money in order to invest in productivity enhancing infrastructure, which will deliver benefits over decades, that is an appropriate thing to do.
DAVID SPEERS: And productivity enhancing borrowing, how do we define that? How do you measure that?
MATHIAS CORMANN: There is a pretty robust process in place now where any significant infrastructure project has to be assessed by Infrastructure Australia. There are robust processes to scrutinise the quality of certain infrastructure investments before they are made.
DAVID SPEERS: So it has to get a tick from Infrastructure Australia?
MATHIAS CORMANN: In relation to road infrastructure to the value of more than $100 million, that is the way the process… interrupted
DAVID SPEERS: Rail infrastructure?
MATHIAS CORMANN: There are cost-benefit analysis processes in place for these sorts of things. In relation to relevant rail infrastructure proposals, business cases have to be put to Infrastructure Australia as well, that is right.
DAVID SPEERS: Because inland rail is not on the high priority list for Infrastructure Australia, is it?
MATHIAS CORMANN: We have progressed aspects of this proposal for an inland rail project from Melbourne to Brisbane in previous Budgets and Budget updates. I am not going to speculate about what may or may not be in next week’s Budget. This falls into the category of nation-building infrastructure obviously.
DAVID SPEERS: So to go to your definition of good debt, it has to be productivity enhancing. So, if it is not given the high priority tick from Infrastructure Australia how do we know that this inland rail is going to be productivity enhancing?
MATHIAS CORMANN: If we were to go down a particular path, we will be providing all of that relevant information in the context of any announcement that is made in relation to such a project.
DAVID SPEERS: I appreciate that. I am just wondering what the principles are, if good debt, you are willing to put our money into has to be productivity enhancing. If it is not given the ultimate tick from Infrastructure Australia, who needs to tick off on it?
MATHIAS CORMANN: I would suggest that an investment in inland rail from Melbourne to Brisbane will be productivity enhancing…interrupted
DAVID SPEERS: Of course you would, but this has been going for 20 years. I am just wondering, how do we know that you are right?
MATHIAS CORMANN: Ultimately, when relevant announcements are made in the Budget and we have provided all of the information in the Budget, which will be delivered Tuesday 7.30pm next week, people will be able to ask all of the questions, test, scrutinise and challenge. In the end, the basic principle is this, day to day living expenses, operating expenses we should not be borrowing in order to fund our day to day operating expenses. It is not inappropriate, it is quite appropriate for you to borrow in order to fund infrastructure but it still has to be good quality infrastructure.
DAVID SPEERS: Labor said that with the NBN, for example. As you have pointed out many times, they spent way too much and they did not do a cost-benefit analysis. At least can we expect from you guys a cost-benefit analysis that says this is okay?
MATHIAS CORMANN: Obviously it has to be good investment in good quality infrastructure. In relation to the inland rail project a lot of work has already been done and there has been reports published for some time now about the benefits of it…interrupted
DAVID SPEERS: And no one has actually done…interrupted
MATHIAS CORMANN: It is a matter of public record that we have gone through a market testing exercise in recent months to assess how such a project could best be delivered, including in partnership with the private sector to share risk with the private sector as appropriate. That is something we have done in recent months.
DAVID SPEERS: The private sector are worried about the risk, that there may not be enough demand there when it is finally built. So the Government then helps carry that risk?
MATHIAS CORMANN: We are looking at how such a project can be delivered in the best possible way and in the best possible way in terms of delivering the project itself and also involving the private sector. That is something that has been part of the public record for some time now. To what extent we are taking this to the next stage that is going to be a matter for the Budget next week.
DAVID SPEERS: Okay we will tune in for that. Housing, Sky News is reporting this afternoon, my colleague Sam Maiden, that there will be some sort of levy or tax if foreigners buy a dwelling and leave it unoccupied. Would that be a good idea?
MATHIAS CORMANN: You would not expect me to comment on pre-Budget speculation. There has been a lot of pre-Budget speculation around, in particular in this space. Not much longer to go until Budget, Tuesday next week.
DAVID SPEERS: Are there many homes and apartments that are left vacant by foreign buyers?
MATHIAS CORMANN: I know that you are inviting me to comment on pre-Budget speculation but, I am just not going to go there.
DAVID SPEERS: Let me go to something that has been announced over the last 24 hours. There will be a Productivity Commission inquiry into the GST distribution formula big issue for your home state, WA. What do you need to know about the GST distribution that you do not know?
MATHIAS CORMANN: Actually the thing that we need to know is a big issue for the country. The focus that we are pursuing with the Productivity Commission review is a national interest focus. We have had credible advice put to us that the current GST sharing arrangements might have a detrimental impact on national productivity growth, on national economic growth…interrupted
DAVID SPEERS: They almost certainly do, don’t they?
MATHIAS CORMANN: We want to ensure that the Commonwealth State financial relations arrangements and the system underpinning Commonwealth State financial relations supports growth, is efficient and supports productivity improvements. So what this Productivity Commission inquiry will do is to assess the impact on the current GST sharing arrangements on national productivity and economic growth.
DAVID SPEERS: It is almost certainly right to say ‘yes it is not very productive the way we share the GST around’, the Productivity Commission no doubt will find that. But here is the thing, is the measure productivity or is it fairness to ensure that the poorer states get some help to deliver the same quality of service?
MATHIAS CORMANN: There clearly is a case for horizontal fiscal equalisation. The question is whether the system as it is currently structured, is structured in the best possible way. We want to ensure that from a national government’s point of view that every State has the right incentives, the appropriate incentives to grow and develop their economy, to pursue Budget reforms on the spending and the revenue side of the Budget. We have had credible advice that there might be features of the system that are a disincentive when it comes to these things and the Productivity Commission will assess all of these arguments and will provide its findings and its recommendations by the end of January next year.
DAVID SPEERS: Which is more important though, to have a productive distribution of the GST or a fair, equitable distribution? They seem to be competing.
MATHIAS CORMANN: Ultimately it is a matter of balance. The question is and this is what the Productivity Commission will look at it, what is the impact on national productivity? What is the impact on national economic growth? Once we have that piece of information it will be an important input into the overall broader consideration of what the right balance is moving forward.
DAVID SPEERS: Isn’t the reality though when you need all the States to agree to any change, it is never going to happen? I mean you are never going to have the States say ‘sure, give us les money’.
MATHIAS CORMANN: I would put to you that it is in the interest of every individual Australian wherever they live in Australia, it is the interest of every individual Australian that every State puts their best foot forward when it comes to growing and developing their economy. Because ultimately if we have the strongest possible growth in each individual jurisdiction, it gives us the strongest possible growth nationally, it means that there is a bigger pie to share around including through GST sharing arrangements, as well as by sharing around opportunity for people across Australia to get ahead.
DAVID SPEERS: Can I turn to, you are actually the acting Minister for Financial Services right now with Kelly O’Dwyer on leave. The Government is announcing a one stop shop for complaints about banks, super funds, financial institutions. What can you tell me about how this would work?
MATHIAS CORMANN: It will be announced in the Budget. It will be delivered in the Budget. So you would be aware that there is a review which was commissioned by Kelly O’Dwyer as a Minister, the Ramsey Review, which has made a series of recommendations. The Government has accepted all of those recommendations. The detail of how this one stop shop for external dispute resolution will be managed, will be part of the Budget.
DAVID SPEERS: Are we talking though about a tribunal that when there is a complaint against a bank, here is the evidence, makes a ruling like a court? Or something a lot less than that?
MATHIAS CORMANN: The specifics will be announced in the Budget. But what we are looking at achieving is a more efficient and better process for consumers and other stakeholders when it comes external dispute resolution. The advantage of external dispute resolution is that it can be lower cost for consumers, it can be lower cost for all involved. You still want to ensure…interrupted
DAVID SPEERS: You will need lawyers and?
MATHIAS CORMANN: You still want to ensure that it has appropriate levels of procedural fairness and natural justice and so on. But there is a series of current processes that is available to consumers and other stakeholders. We want essentially, based on the recommendations of the Ramsey Review, to bundle all of that into a single one stop shop process and the details of which will be in the Budget.
DAVID SPEERS: And finally the Treasurer did talk today when he was asked about what this Budget is about next week. He talked about cost of living pressures, he talked about the flat wages growth over some years now. What can you tell us about how the Budget will help with those issues?
MATHIAS CORMANN: We are very mindful of comparatively flat wages growth in recent times. One of the key reasons why we are pursuing a more competitive business tax rate is because it will drive additional investment, additional productivity improvements, which will help increase real wages over time. Increasing real wages over time is a central objective of our national economic plan…interrupted
DAVID SPEERS: No sign the Senate will give you the rest of those tax cuts.
MATHIAS CORMANN: When it comes to cost of living pressures, cost of electricity is a significant component of cost of living pressures. As you would be aware the Government for some time now has focused on how we can improve our policy settings to deliver more affordable, reliable energy supplies in a way that still helps us to achieve our emissions reduction targets.
DAVID SPEERS: So we can expect more along those lines in the Budget?
MATHIAS CORMANN: The Budget will be delivered next week. But as we have said for some time, we are very focused on policies that will help deliver affordable, reliable energy.
DAVID SPEERS: Alright, Mathias Cormann, the Finance Minister, a week and day out from the Budget, thank you very much for joining us.
MATHIAS CORMANN: Always good to be here.