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We're implementing our economic plan says Mathias Cormann -

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LEIGH SALES, PRESENTER: Australia's economy grew at half the pace experts expected in the June quarter. Over the past year, GDP's been at two per cent, well below the growth trend rate of 3.25 per cent. The Australian dollar plunged to a six-year low when the national accounts data came out today, ending up at 70 cents US.

With me now from Perth is the Finance Minister, Senator Mathias Cormann.

Senator, is Australia heading for a recession?

MATHIAS CORMANN, FINANCE MINISTER: No, Leigh. The Australian economy continues to grow, despite the biggest fall in our terms of trade in about 50 years and, you know, while other commodity-based economies like Canada and Brazil are in recession, we continue to grow and we're certainly in a stronger position than we would have been if we had not got rid of some of these anti-jobs, anti-investment, anti-growth policies of the previous Labor government.

LEIGH SALES: You bring up Canada. Let me draw a comparison. We've got a similar unemployment rate, possible housing bubbles in major cities, both currencies falling more than 20 per cent against the US dollar, ultra-low interest rates, which mean monetary policy can't do much more heavy lifting, and a similar reliance on commodities as a percentage of exports. As you mentioned, they're in recession. Why wouldn't we follow suit given all those common factors?

MATHIAS CORMANN: Well we came into government with - facing a weakening economy, rising unemployment and a budget position that was rapidly deteriorating and we came into government with a plan for stronger growth, more jobs and to repair the budget. We are implementing that plan. That plan is focused on making sure that our economy's as competitive internationally as it possibly can be, bringing down the cost of doing business and of course improving productivity. That's why we got ...

LEIGH SALES: But even - sorry.

MATHIAS CORMANN: That's why we got rid of Labor's carbon tax, that's why we got rid of the mining tax, that's why we've reduced red tape costs for business by more than $2 billion a year, that's why we're rolling out our record investment in productivity-enhancing infrastructure and that is why we're entering into those key free trade agreements with key markets which will help businesses, Australian businesses get better opportunities to grow into those markets and create more jobs here in Australia.

LEIGH SALES: But even with all that you've outlined there, minister, if not for a boost in government spending last quarter, this would have been a negative result. Two negative results and you're in recession territory.

MATHIAS CORMANN: Well, firstly, to pick you up there, spending growth now is of course lower than what it was when we came into government. We inherited spending growth of about 3.7 per cent above inflation.

LEIGH SALES: But that's actually tangential to what I'm saying. I'm saying if not for the Government's spending in the past quarter, you would have been in negative territory.

MATHIAS CORMANN: Well if you're suggesting that if it wasn't for the Government's economic plan for stronger growth, more jobs and to repair the budget, we would be in a weaker position, that is certainly true.

LEIGH SALES: No, I'm not suggesting that. I'm suggesting that the economy's generally weak and that the Government activity is propping up what is a very weak economy.

MATHIAS CORMANN: The economy continues to grow and the economy is in a stronger position than it would have been if we hadn't got rid of all the lead that the previous government put into our saddlebag at a time when clearly we were facing a geo-economic challenges, when we are dealing with a significant transition in our economy, given that we are dealing with the biggest fall in our terms of trade in about 50 years. Given all of the external challenges that we're facing, on the back of our economic plan for stronger growth and more jobs, the economy's performing better than other similar economies in other parts of the world and that is surely good news. What we need to do is we need to keep working to lift productivity, to bring down the cost of doing business and to ensure our economy's as competitive as possible moving forward.

LEIGH SALES: Senator, one of the high-profile budget items this year was the $20,000 cashback for business expenditure. Isn't there a risk that that sort of one-off expenditure might prop up growth figures for a few extra quarters, but then it's going to run out and you're going to be in the dreaded negative growth territory coming into an election?

MATHIAS CORMANN: Well what you're calling a cashback is actually a tax cut for small business. And of course what we have said in the Budget is that we would let small business have more of their own money and for the Government to collect less of their money from them so that they can invest it in their future success, so that they can be the most successful they can be and employ more Australians along the way. I mean, small business is the engine room of the economy. They are employing a significant proportion, of course, of the Australian workforce and ...

LEIGH SALES: But Senator, sorry to interrupt, you're not addressing my point, which is that sort of a ...


LEIGH SALES: That sort of a program is perhaps masking a weaker figure that we could be expecting in a couple of quarters' time when the effects of that program stop being felt.

MATHIAS CORMANN: Well, you're quite wrong. I mean, that program in the Budget is of course part of a broader, long-term economic plan. It has got a whole series of elements, a number of which I have already mentioned on your program tonight. There's of course more to this. I mean, the next important part of course of our plan to ensure our economy's as competitive as it can be is to pursue comprehensive tax reform and in the lead-up to the next election, we will be putting a tax reform package to the Australian people, which in - as part of our second-term agenda will continue to put Australia on a stronger economic and fiscal foundation for the future.

LEIGH SALES: Senator, one of the key ways that living standards are measures are via real net national disposable income per capita. This is the third consecutive year that growth has been negative. Isn't that a clear indication that for the average, Australian things are going in the wrong direction?

MATHIAS CORMANN: Well, I don't agree with this. I mean, obviously we are dealing with a transition in the economy, given that our terms of trade are falling to the largest extent in about 50 years. But having said that, wages are growing above inflation. That means ...

LEIGH SALES: But wage growth is very, very slow.

MATHIAS CORMANN: And inflation is very low as well. So, I mean, obviously - I mean, there's a whole range of developments in the economy. The fundamental point though is that the economy now is in a stronger position than it would have been if we hadn't implemented our plan for stronger growth and more jobs and our economy would be in a worse position if we had stayed on the bad trajectory that we were on when we came into government.

LEIGH SALES: Well on that trajectory that you're on, when Labor left office, unemployment was 5.8 per cent, it's now 6.3. Growth was 2.5; it's now two per cent. The Australian dollar was 92 cents; now it's 70 cents. On those Labor numbers, the Coalition said we were in the grip of a budget emergency, so what are we in now then?

MATHIAS CORMANN: Well, I think you ignore some very basic realities when it comes to the impacts of economic policy. When Labor lost government, we were on track for an unemployment rate of 6.25 per cent at the end of June, 2015. We actually came in quite a bit better than that at 6.1 per cent.

LEIGH SALES: It is going up, unemployment.

MATHIAS CORMANN: Well, actually, that is not right. I mean, employment growth, that is actually one of the very encouraging indicators in the national accounts and it's also been picked up by the Reserve Bank Governor in recent - in recent times. Employment growth is quite strong, much stronger than when we came into government, more than four times as strong as when we came to government. And indeed, the unemployment rate is now expected to - well it's now lower than what was anticipated in the past on the back of better labour market conditions. So, our economic plan is working. Our plan for stronger jobs growth is working. It is true that we've got stronger workforce participation now in the economy. More Australians are coming back into the workforce. We've got the highest level of female workforce participation since ABS records were kept, which is of course a very pleasing development, but that means that we've got to just continue to work harder to strengthen growth and create more jobs.

LEIGH SALES: Senator, we're out of time, unfortunately. Thank you very much for joining us.

MATHIAS CORMANN: Always good to talk to you.