Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
KIERAN GILBERT: Joining me the Finance Minister Mathias Cormann. Just touching on the tensions in the Korean Peninsula, I know you have been meeting with senior figures in Tokyo and in Seoul, is it affecting the economic climate, the investor climate in those two countries, the ongoing provocation out of Pyong Yang?
MATHIAS CORMANN: The economies both in Japan and in South Korea are performing well. Their unemployment rate is very low. There is an intensity and a tension there because of the very serious situation they are facing, but I have been quite surprised by people’s determination to just get on with it and people are just, comparatively, at the busienss end, people are comparatively relaxed.
KIERAN GILBERT: Because they are clearly, both of those nations, where you are, only kilometres away from Pyongyang, but their focus I guess forged by many years of living with that threat is just to get on with it.
MATHIAS CORMANN: Again, at a function in Seoul with asset managers here in Korea last night, that was their point. This is a situation that they have lived with for a very long time. This is a particularly serious phase in that history, but there is a determination to just get on with it and to continue to develop and grow their economy and create the best possible opportunity for people here in South Korea to get ahead. I have been quite surprised at how comparatively relaxed people actually are, given the intensity of the situation.
KIERAN GILBERT: Our trade with both Japan and Korea is strong, but comparatively weak when it comes to financial services. Why is that and how do you rectify it?
MATHIAS CORMANN: That is part of the reason why I am here. With Korea for example, it is our fourth biggest trading partner, $33 billion worth of two way trade. Most of it in goods, only a relatively small proportion in services and an even smaller proportion in financial services. Less than $70 million in trade in financial services between South Korea and Australia. There is a significant opportunity for us to do more. Partly that is because of a lack of integration and a lack of alignment when it comes to regulatory settings in the financial services space. Australia, some time ago, took the initiative to develop and promote the establishment of an Asia Region Funds Passport that seeks to align regulatory arrangements around key financial products across the region. It will make it easier for us to do business with each other in the financial services space, provide financial products across our region,for our fund managers to be able to provide services here, for investors across the region to invest in each others’ markets. We do have Macquarie who has had a very strong presence here in Korea for some time and has been very successful. IFM in recent times has entered into a key partnership with Samsung Asset Management here. There are individual success stories, but there is certainly a lot of opportunity for us to do more and to put another leg to what is a very substantial trade relationship.
KIERAN GILBERT: Obviously the economic is linked to the geopolitical as well, as we saw recently with Chinese sanctions against the South Korean company Lotte. That was over the THAAD missile system, which the South Koreans have put in place with the US. What is the view towards China out of both Tokyo and Seoul about their future relationship in an economic sense but underpinning that of course is China’s foreign policy assertiveness and South Korea as I said, has very much bear the brunt of that in recent times.
MATHIAS CORMANN: Japan and Korea from an Australian point of view are very close and very important strategic, security and economic partners. In particular, in the case of Korea it does a lot of business with China as we do. So you continue to manage all of the important aspects of a key trade relationship at the same time as you continue to focus on your strategic interests.
KIERAN GILBERT: Now onto some domestic issues, Peter Costello is calling for the Federal Government to basically take control of default super funds away from the union backed superannuation set up. Is this something that you would look at? Does it make sense in terms of the argument around economies of scale as put by the former Treasurer?
MATHIAS CORMANN: I have read that story in The Australian this morning. It is the first time that I have heard that proposition put. The key when it comes to superannuation and what people across Australia are looking for is to ensure that one, their money is safe and two, that the investment returns, the net investment returns on their retirement savings are maximised. That is why it is important that we have a transparent, efficient, competitive superannuation system. It is a big industry now. It is a big savings pool of $2.3 trillion and growing rapidly. So it is very important that the governance arrangements are right. That there are appropriate levels of competition. My good friend and colleague Kelly O’Dwyer is pursuing important reforms to ensure that there is strong and appropriate governance over all parts of the superannuation system. We are also very keen to ensure that there is appropriate competitive tension in the default super system. Default super is all about protecting the interests of those Australians who don’t make active choices in relation to their superannuation. So it is very important to ensure that that system is as transparent, as efficient and as competitive as possible so that people in the end can have their retirement income maximised.
KIERAN GILBERT: But the funds that the unions are involved in, the industry funds, have outperformed the others haven’t they? And can you reassure the workers and the superannuation holders that this is not just about the Government seeking to diminish union influence?
MATHIAS CORMANN: Again, I am not commenting on what Peter Costello has put forward in The Australian today. I am talking about what the Government is doing. We are focussing on making sure the system is on the best possible foundation for the future. Looking ahead and looking at the fact that we have $2.3 trillion worth of retirement savings of Australians and wanting to ensure that the retirement income of Australians can be maximised, we need to ensure that the system has got appropriately strong corporate governance arrangements and corporate governance integrity. That the money that Australians have invested is safe and secure. But also that investment returns, net investment returns are maximised. That is why we have to ensure that there is appropriate competitive tension. That there are appropriate corporate governance arrangements. These are all things that Kelly O’Dwyer is focussing on. There is a Productivity Commission review into this whole area of default super to make sure we can get the policy settings right into the future.
KIERAN GILBERT: Okay, and on the major health insurance reforms to be announced by Greg Hunt today. We are talking about discounted cover for 18-29 year olds, discounts of up to two per cent for each year under the age of 30 phased out at the age of 40. Hoping to keep people in the system as opposed to fleeing it as we have seen by the thousands in recent months.
MATHIAS CORMANN: These are very substantial reforms that Greg Hunt will be announcing today, designed to make private health insurance simpler and more affordable into the future. It is very important for us to continue to have a strong private as well as a strong public health system to ensure that all Australians can have timely and affordable access to quality health care. Those Australians taking out private health insurance make an additional contribution to funding their health care needs. But it is important that we keep access to private health insurance as affordable as possible. The reforms that Greg is announcing today, enabling people to take on higher excesses, providing discounts to younger Australians taking out private health insurance and pursuing reforms to address the growing costs of prostheses for example, they are all designed to put downward pressure on the cost of health insurance premiums which will help ensure that more Australians can afford to remain or to join private health insurance into the future.
KIERAN GILBERT: And can you guarantee that it will drive down premiums? There is talk that it will bring it down by 5 per cent.
MATHIAS CORMANN: It is about driving down future increases. The cost of health continues to increase. We have had sizeable increases in the cost of private health insurance in the past. What Greg is seeking to achieve is to bring that down to bring any increases in the future down to CPI, to the level of inflation. So this is about putting downward pressure on future premiums. That is precisely what we are trying to achieve.
KIERAN GILBERT: Okay Minister thanks for joining us live from Seoul in South Korea.