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Budget 2014: Transcript of interview with Emma Alberici: ABC, Lateline: 13 May 2014: Budget 2014-15

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DATE: 13/05/14

TITLE: Lateline

TOPIC: Budget 2014-15

EMMA ALBERICI: A short time ago the Minister for Finance, Senator Mathias Cormann joined me in our Parliament House studio. Mathias Cormann, thanks for joining us.

MATHIAS CORMANN: Good to be here.

EMMA ALBERICI: Two days before the election Tony Abbott said there would be no cuts to education, no cuts to health, no cuts to the ABC. Now we learn you're taking $80 billion out of health and education and $230 million from the ABC. Next time you face the voters why should they trust what you say?

MATHIAS CORMANN: They should trust what we say because we kept our promises and because we made the difficult decisions in the national interest.

EMMA ALBERICI: You kept your promises? You just - I just made it clear there that you didn't.

MATHIAS CORMANN: Absolutely not. What we promised in the lead up to the last election was that we would keep the same funding envelope in place for health and we are. But we are achieving well targeted efficiencies and investing the savings back into the health system through the Medical Research Future Fund. In relation to education, it was very clear all the way through that we were committed to maintaining the so-called Gonski funding for the first four years and we are. But beyond that we're putting Federal funding back onto a more sustainable footing. What we've done in this Budget tonight is present our plan to build a stronger economy and repair the Budget mess that we've inherited from our predecessors. That was our most fundamental promise to the Australian people.

EMMA ALBERICI: So that all sounds like an excuse and in his victory speech Tony Abbott said yours would be a Government of 'no surprises and no excuses'?

MATHIAS CORMANN: We're not making any excuses. We're taking responsibility. Over the last seven or eight months, the Prime Minister and the ERC and the whole Cabinet have very carefully assessed all of the information about where we are and about where we would be heading if we stayed on the unsustainable spending growth trajectory that Labor left behind. We made judgments on what we believe is in the national interest. We made judgments on how we can strengthen our country for the future and how we can repair the Budget mess that we've inherited. That's what we've done and we'll stand by those and we take responsibility for those judgments.

EMMA ALBERICI: You're taking $80 billion from the States, are you banking on the fact that premiers and chief ministers will come begging for you now to increase the GST?

MATHIAS CORMANN: What we're doing is putting the Federal spending growth trajectory onto a more sustainable footing. When we came into Government spending growth was heading for 26.5 per cent as a share of GDP by 2023-24. To put that into perspective, the last year of the Howard Government that was 23.1 per cent of GDP. If we hadn't taken action, spending would increase from

$409 billion to $690 billion in 2023-24. That was not sustainable, that was not affordable and we needed to take corrective action. Because, if we kept spending at that rate, taxes would have had to go up or Government spending would have been unsustainable.

EMMA ALBERICI: You just said over the Howard years by the end spending was at 23.3 per cent of GDP but over your Budget period spending is 1.6 percentage points above that on average, 24.9?

MATHIAS CORMANN: We've inherited a situation for this year with spending as a share of GDP, Labor's ... interrupted

EMMA ALBERICI: This is your spending, so these are your decisions.

MATHIAS CORMANN: Indeed. So, in Labor's last Budget spending as a share of GDP is 25.9 per cent.

EMMA ALBERICI: But on average, sorry to interrupt, but on average Labor's years it was 25.1, over your forward estimates it's 24.9. There's 0.2 of a percentage points in it. It's not like you're taking spending and making a dramatic difference.

MATHIAS CORMANN: We are actually making a dramatic difference. The story of this Budget are the structural savings and reforms which start slow and low and build over time. If you look at the trajectory that we're putting the country on, we are focused on taking spending as a share of GDP down to 24.4 per cent by 2023-24. We are on track for a surplus of more than 1 per cent as a share of GDP by 2024-25...interrupted

EMMA ALBERICI: By 2024, did you say?

MATHIAS CORMANN: By 2024-25. What we've got to look at is the trajectory we're now on, which is more sustainable and will help us deliver tax cuts in the future rather than the trajectory we were on under the previous government.

EMMA ALBERICI: Peter Costello says the deficit tax has no economic benefit whatsoever. Given that it does raise so little money, it's just a fig leaf, isn't it, so you can say you're sharing the pain around?

MATHIAS CORMANN: We disagree with him and it raises $3.1 billion from people that already do much of the heavy lifting when it comes to Government revenue from income taxes. We have gone out of our way to ensure that everyone is asked to make a contribution. Everybody has to contribute fairly and equitably to the Budget repair effort. We didn't want to impose all of the burden, 100 per cent of the burden on pensioners and recipients of Government allowances.

EMMA ALBERICI: You just mentioned there that this deficit levy hits those who are engaged in the most heavy lifting as far as income tax goes and then the latest tax office figures show that more than 1,000 Australians earning more than $150,000 pay no tax at all thanks to things like negative gearing and 75 people earning more than a million pay no tax at all.

MATHIAS CORMANN: This is not the end of the journey. This Budget is the start of the journey. We have already said that we would engage in fundamental tax reform through a tax white paper process, which will commence shortly. This is our first Budget. In this first Budget we've made significant structural reforms on the spending side. Nearly 80 per cent of the Budget repair job in this Budget comes from spending cuts. We have ensured that there is an effort that is spread fairly and equitably through some tax measures. But beyond that, there is a job to be done to ensure our tax system is as efficient and as well targeted as possible.

EMMA ALBERICI: Now it's unlikely that your paid parental leave scheme will make it through the Senate. Given that, where does that leave the $3 billion in extra tax you're looking to raise from big business?

MATHIAS CORMANN: I wouldn't make assumptions on what may or may not happen in the Senate... interrupted

EMMA ALBERICI: Why not? We know the attitude of everyone in the Senate and we know how to calculate, it's a simple maths equation, isn't it?

MATHIAS CORMANN: You might think you do. I've been in the Senate for six years and I've seen people say all sorts of things and when it came to voting on the floor of the Senate things out of nowhere change. There are a lot of things for people in the Labor Party and in the Greens to think about and to reflect on when it comes to making decisions in the national interest. We will continue to make our case on why the paid parental leave scheme that we've put forward is an important economic and social reform. We are hopeful that we will be able to convince enough people in the Senate to support what is a very important productivity measure, a very important reform to help us build a stronger economy.

EMMA ALBERICI: And yet there's no evidence whatsoever been raised by anyone that it will encourage women to stay in the workforce?

MATHIAS CORMANN: Well I disagree with that. Clearly, we have got a structural challenge in Australia that comes with the ageing of the population. One of the implications of that is that our workforce participation rate is dropping. We do need to do more to lift work force participation. There are two important parts of this in terms of lifting female work force participation - better paid parental leave arrangements and better child care arrangements. We are pursuing significant initiatives in both those areas. There's a Productivity Commission review in the context of child care in particular and we do need to lift female work force participation into the future.

EMMA ALBERICI: Mathias Cormann, we're out of time. Thank you so much.

MATHIAS CORMANN: Good to be here.