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Transcript of doorstop interview: Mural Hall, Canberra: 7 May 2018: Budget; business tax cuts



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Minister for Finance

Senator the Hon. Mathias Cormann Minister for Finance Leader of the Government in the Senate Senator for Western Australia

Transcription:

PROOF COPY E & OE

Date:

7/5/2018

Topic(s):

Budget, business tax cuts

QUESTION: Minister, you have got a temporary revenue boost, how sustainable is your spending?

MATHIAS CORMANN: The Budget will be delivered at 7.30pm tomorrow night. You will see what the Government's forecasts and projections are, both for revenue and expenditure. What I can reassure you of, is that the Government, as we have always done, has made the decisions based on what is right for Australia. We have made decisions to make sure that we put the economy on the strongest possible foundation and trajectory for the future. We have made decisions to ensure that the Budget is on the strongest possible foundation and trajectory for the future. All of the detail will be revealed tomorrow.

QUESTION: Has reducing debt and deficit become dirty words for the Government. Given that a few years ago, we were facing a Budget emergency as a result of the level of debt that Australia has?

MATHIAS CORMANN: Firstly, we have been reducing the deficit. We are on track to a believable surplus. We have now consistently forecast a projected return to surplus by 2020-21 since the half-yearly Budget update in December 2015. Self-evidently, to reduce debt, you have to get back into surplus. The Budget situation that we are in today is better than it would have been if Labor had stayed in government and the policy settings for the Budget had stayed the same. We have significantly reduced the spending growth trajectory that we inherited from Labor. Under Labor, spending growth was running at about 4 per cent on average above inflation year on year. Under the Coalition, it has been running below 2 per cent. So self-evidently, we have been better at keeping spending growth under control than Labor was. Let us just remind ourselves, the situation that we inherited from the Labor party in 2013 was a weakening economy, rising unemployment and a Budget position that was rapidly deteriorating. When Chris Bowen went to the 2013 election as the Treasurer of Australia, he presided over a $3 billion a week deterioration in the Budget bottom line. We are now on a path back to surplus. A believable path back to surplus.

financeminister.gov.au/transcript/2018/05/07/doorstop-mural-hall

When we get back into surplus, we will be paying down debt.

QUESTION: Minister, crossbench Senators are already calling this a pre-election Budget. They are accusing the Government of spending on infrastructure to simply buy votes. Is that a fair assessment?

MATHIAS CORMANN: This is our next instalment in our plan for a stronger economy, more jobs, to ensure that funding for all of the essential services that people expect can be guaranteed. A Budget to ensure that Government can live within its means. This is a Budget in the great tradition of Coalition Budgets, which focuses on keeping taxes as low as possible while making sure that funding for all of the important services is on a sustainable trajectory for the future.

QUESTION: Minister, on company tax cuts, where can compromise be found there in terms of negotiations with the Senate?

MATHIAS CORMANN: The Government continues to engage with the Senate crossbench. Thirty-seven Senators already support the Government's plan to reduce the business tax rate to 25 per cent by 2026-27. If we continue to put Australian businesses at a disadvantage compared to businesses in other parts of the world who pay less tax, we would be putting the job security of Australian workers at risk. We would be reducing the opportunity for more jobs being created. We would be reducing the opportunity for higher wages into the future. Only if the Australian business sector can continue to be competitive with business sectors in other parts of the world will we be able to reach our full potential as an economy.

QUESTION: But do you think that your job has now been made harder as a result of this Budget, many of the spending measures are being driven by revenue and that is as a result of better company profits and the tax that you are getting from that. Don’t you think that there will be some of these Senators saying that well if you are getting revenue under the existing taxing regime, why lower them?

MATHIAS CORMANN: We have already legislated the first three years of our ten year enterprise tax plan. We have reduced business taxes for businesses with a turnover of up to $50 million down to 25 per cent. It would not be sensible to keep a differentiation in the tax rate between small business and larger businesses. In many ways, the biggest businesses of Australia are most exposed to competition from other parts of the world. Small business will tell you that they believe that it is very important for them and their future success that the business tax cut is applied to all businesses. In the end, nine out of

ten working Australians work for a private sector business. Their future job security, their future career prospects, their future wage increases depend on the future success and profitability of the businesses, big and small, that employ them and pay their wages. If we put those businesses, employing nine out of ten working Australians, at a continued competitive disadvantage it will put their job security at risk. That is precisely what we try to avoid.

QUESTION: Minister, tomorrow’s income tax cuts are so low that voters simply won’t feel them. Are they worthwhile?

MATHIAS CORMANN: Do you know what tomorrow’s income tax cuts will be?

QUESTION: There are suggestions they will be quite low.

MATHIAS CORMANN: Again, less than thirty-six hours to go before the Treasurer will release the Budget. All the detail will be revealed. What I can assure you of, is that the Government has made decision based on what is sensible, what is affordable, what is good for the economy, what is good for the Budget. We have been balancing all of the different priorities that a government at any one point in time has to consider. We want the economy to be able to be as strong as possible. We want as many jobs as possible able to be created in the economy. We want the services provided by Government to be fully funded. We want Government to live within its means. In that context, we want taxes to be as low as possible. We certainly are committed to staying below the speed limit of 23.9 per cent

tax as a share of GDP.

QUESTION: What is the purpose of pegging the tax at that particular percentage? Because it is a metric that I think a lot of voters wouldn’t have been familiar with up til now. How are you going to communicate the importance of this largely invented metric?

MATHIAS CORMANN: It is not invented at all. It has been underpinning our revenue projections ever since we have been in Government. If you look at the first speech that the Shadow Treasurer gave to the press club in December 2013, I would encourage you, 5 December, he was out there saying how important it was that we stuck to the tax as a share of GDP speed limit. But ever since, Labor has done what Labor does, they have lost all discipline on the spending side. So because they want to waste too much money on the spending side they have to chase it with ever higher taxes, putting their hands into the pockets of the Australian people. If you take too much money out of the economy as a government, you harm the economy, you harm jobs. That is what would happen if Labor got into government. If there is lower growth and fewer jobs and higher unemployment, it means lower wages growth, because higher unemployment growth means less competition for workers. We want the precise opposite. We want taxes to remain as low as possible, as high as necessary but as low as possible, below 23.9 per cent, because we believe that is what is required in order to keep economic growth as strong as possible and employment growth as strong as possible. That is what is ultimately the ingredient for stronger wages growth into the future.

QUESTION: If the High Court finds against Katy Gallagher on Wednesday, does the Coalition consider that as having implications for other Labor Senators?

MATHIAS CORMANN: I am not going to comment on what the High Court will find. That is a matter for the High Court. What I would say though, is that clearly right now, there are people in the House of Representatives, in Bill Shorten’s team that are there in breach of the Constitution. Susan Lamb, by her own admission, is a British citizen. Our Constitution makes it very clear that to be eligible you have to be an Australian citizen only, which Susan Lamb, clearly is not.

QUESTION: That 23.9 per cent, can you explain how we lock that in?

MATHIAS CORMANN: It is the long term average in terms of tax a share of GDP. It is

something that we have applied to our revenue forecasts as a forecasting assumption ever since we delivered our first Budget. As of this Budget, we are making it a formal part of our fiscal strategy. So if Labor wants to increase the overall tax burden in the economy at a cost to growth and jobs then they would have to formally change the fiscal strategy settings.

QUESTION: Have the infrastructure spending promises that are expected in the Budget to ease congestions in cities done anything to quell internal rifts within the Coalition over immigration policies?

MATHIAS CORMANN: We are completely committed to increase the level of productivity enhancing and congestion busting infrastructure investment. We are increasing the level of investment by about $24 billion over the decade in this Budget. The detail will be in the Budget tomorrow.

QUESTION: In respect to the ratio, the tax ratio, how will you actually lock it in?

MATHIAS CORMANN: We have actually locked it in to our revenue assumptions in terms of the forecasts and projections since our 2014-15 Budget. We now have formalised it as part of our fiscal strategy, as a formal Government policy decision. Instead of just being a forecasting assumption it is now a feature of our formal fiscal strategy. If Labor wanted to go to the next election promising higher taxes, they will have to tell people that they would change this particular feature of the Federal Government’s fiscal strategy. They would have to explain what that means in terms of lower growth, fewer jobs, higher unemployment and ultimately, on the back of higher unemployment, lower wages. I would just again, remind all Australians, that when Bill Shorten and Chris Bowen lost government in 2013 they left behind a weakening economy, rising unemployment and a rapidly deteriorating Budget position. If Labor was allowed to reintroduce their failed policies of the past, higher taxes, higher spending, that is what we would get again, a weakening economy, rising unemployment and a rapidly deteriorating Budget position. That is what Labor does. Under the Coalition, our plan for the economy, our plan for jobs, our plan to get the Budget back into balance is working. This is not the time to change direction.

Thank you.