Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
TICKY FULLERTON: Well for an inside view on the Budget I caught up with Finance Minister Mathias Cormann shortly after the Treasurer’s speech.
Minister thank you so much for joining. Now what a Budget, the highest taxes to GDP since before the financial crisis, 24.3 per cent out at 2020-21.
MATHIAS CORMANN: Actually, the tax as a share of GDP cap remains unchanged at 23.9 per cent. We have always had our revenue forecast…interrupted.
TICKY FULLERTON: Out to 2020-21 isn’t it? 24.3?
MATHIAS CORMANN: Well our revenue forecasts have been based on an inbuilt assumption that tax revenue as a share of GDP would not rise beyond 23.9 per cent. That remains unchanged. You have to remember when we came into Government spending as a share of GDP was on track to reach 26.5…interrupted.
TICKY FULLERTON: So is this number wrong?
MATHIAS CORMANN: No. What I am saying is that we have got a tax cap as a share of GDP of 23.9 per cent. That is in the Budget today. It was in the Budget last year. It was the Budget the year before. So that remains unchanged. There are tax measures in this Budget of course. There is no question about this. We had to do this because one, the NDIS remained not fully funded and we were committed to pay for it with savings. But the Senate was not prepared to pass all those savings, so we had to make decisions on the revenue side. Furthermore, we need to get the Budget back into surplus. But the point I would make is that spending as a share of GDP is now down to 25 per cent which is the lowest in a long time. It is just slightly above the long-term average of 24.8 per cent…interrupted.
TICKY FULLERTON: You have now a situation where this Government is pretty much fully funding the Gonski reforms. It is pretty much fully funding the NDIS and it is now guaranteeing Medicare. This is more like a Labor Budget isn’t it?
MATHIAS CORMANN: I totally disagree. This is what I was trying to say before, before you interrupted me. Spending under Labor as a result of Labor’s policy settings was increasing at 3.7 per cent above inflation, we have controlled spending growth to 1.9 per cent above inflation. When we came into Government spending as a share of GDP was heading for 26.5 per cent and rising within the decade. We have been able to bring that down to 25 per cent just slightly above the long-term average of spending as a share of the economy of 24.8 per cent…interrupted.
TICKY FULLERTON: Helping you a lot, helping you a lot is a $6 billion tax on the big five banks. How are you going to make sure that that tax is not in any way passed onto either lenders or borrowers?
MATHIAS CORMANN: The levy, the major bank levy, is much better designed than a previous attempt at imposing a levy on the banks by the previous Government. The previous Government imposed a levy, a bank deposits tax, so called on every day…interrupted.
TICKY FULLERTON: So are you going to be able stop that?
MATHIAS CORMANN: We have excluded deposits of up to $250,000. We have excluded any banking product that will be subject to the financial claims…interrupted.
TICKY FULLERTON: But what is stopping a pass through?
MATHIAS CORMANN: We have excluded every product that is part of the financial claims scheme from the scope of this particular levy. Banks are highly profitable in Australia courtesy of an implied Government guarantee and very strong regulation. $30 billion…interrupted.
TICKY FULLERTON: And they are in a weak position politically…interrupted.
MATHIAS CORMANN: If I may, $30 billion worth of profits, that is after tax profits, $30 billion worth of after tax profits per year. This is a $1.5 billion levy that helps to repair the Budget, it helps to get us back into surplus. We believe it is proportionate…interrupted.
TICKY FULLERTON: How are you going to stop it passing through? The cost passing through?
MATHIAS CORMANN: One of the consequences, because it only applies to the major banks, it does not cover the smaller banks and the non-bank institutions which it did under Labor. That will enhance competition because it helps to improve the level playing field for the smaller banks… interrupted
TICKY FULLERTON: So people can move banks?
MATHIAS CORMANN: …that will help put downward pressure on prices, because there is competitive tension. We have got an ACCC inquiry into relevant pricing arrangements and ultimately with $30 billion worth of after-tax profits, we believe that the banks can afford this and that this is a proportionate and reasonable contribution towards budget repair…interrupted.
TICKY FULLERTON: $6 billion shores up your AAA rating, which you are confident about keeping. What does it do to the five per cent tax on their net profits? What does that do to the AA- say, of their credit rating, the bank’s credit rating?
MATHIAS CORMANN: We would have preferred to achieve more on the spending reduction side of the Budget. There are about $14.7 billion worth of savings measures from previous Budgets that we have had to reverse, because the Senate clearly was not going to support them. There is no two ways about it, if you cannot get back into balance, into surplus by reducing expenditure to the full extent that you want to, then you have to do it on the revenue side of the Budget, or you increase your deficits and debt and that would be bad for the economy, which ultimately would be bad for the banks.
TICKY FULLERTON: Last couple, a lot on infrastructure. Is over $8 billion to an inland rail, is that good debt?
MATHIAS CORMANN: It is a capital investment, it is an equity injection. The difference between good debt and bad debt that we have spelt out is that when you have to borrow for your day to day living expenses, that is bad. If you have to borrow to fund your hospital expenditure, your medical expenditure, your schools expenditure, your welfare expenditure…interrupted.
TICKY FULLERTON: So it is about recurrent? But surely there is…interrupted.
MATHIAS CORMANN: …but if you borrow to invest in a capital item that delivers benefits…interrupted.
TICKY FULLERTON: But surely there is good and bad debt, there is good and bad debt on the capital side as well. Is that good debt, Inland Rail?
MATHIAS CORMANN: It is a very good project. What you are saying here is we need to invest capital investment into good quality projects. We believe that the Inland Rail project from Melbourne to Brisbane is a very good project, it is a project that will be delivered by the Australian Rail Track Corporation, in partnership…interrupted.
TICKY FULLERTON: Will there be a cost-benefit analysis on it?
MATHIAS CORMANN: There has been a cost-benefit analysis of it. It has actually already been assessed by Infrastructure Australia. Infrastructure Australia has clearly spelt out the benefits that will come with it and it will be delivered in partnership with the private sector. The $8.4 billion equity injection is the Government’s contribution, there will be borrowings by the Australian Rail Track Corporation and there will be additional private sector…interrupted.
TICKY FULLERTON: Mark Birrell was quite concerned about this.
MATHIAS CORMANN: Who is concerned?
TICKY FULLERTON: Mark Birrell at Infrastructure Australia is quite concerned about the Government owning and operating these sorts of assets, is that…interrupted.
MATHIAS CORMANN: The Australian Rail Corporation is a Government Business Enterprise today, it was a Government Business Enterprise yesterday, it will be a Government Business Enterprise tomorrow and it is delivering this project.
TICKY FULLERTON: Finally Minister, just on superannuation and housing affordability. Are you really going to make a difference with this First Home Buyers, or is it simply going to put up the price of housing?
MATHIAS CORMANN: What the Treasurer has delivered tonight is a comprehensive package which seeks to boost supply and which is pursuing some sensible initiatives on both sides of the supply and demand equation.
TICKY FULLERTON: Minister, thank you so much I know that you are very short of time. Appreciate it.
MATHIAS CORMANN: Thank you.