Cormann Appears To Confirm Deficit Levy In Budget; Unease On Government Backbench

The Minister for Finance, Senator Mathias Cormann, has appeared to confirm that the federal government will introduce a deficit levy in next week’s Budget.

Cormann

Speaking at a press conference after a Cabinet meeting today, Cormann maintained the government’s line on what it says is a budget emergency. He said that people on high incomes had to play their part through what he termed “appropriately targeted measures”.

Cormann promoted a booklet titled “Labor’s Mess” that he said has been produced by Liberal backbencher Kelly O’Dwyer. In fact, the booklet is authorised by the Federal Director of the Liberal Party, Brian Loughnane. It appears on a Liberal Party website authorised by Loughnane.

Cormann’s remarks come as criticism of the proposed levy mounts inside the government party-room. The tax has been criticised by former Howard government ministers Peter Costello and Peter Reith. The Queensland backbencher, Teresa Gambaro, today attacked the tax as a “breach of promise” and said it would have “devastating impacts on the economy”.

  • Listen to Cormann (15m – transcript below)

14-05-06_labors-mess

Official transcript of press conference issued by the Minister for Finance, Senator Mathias Cormann.

Press Conference – Outlining the Budget challenge

MATHIAS CORMANN: In just under a week we will be delivering the first Budget of the Abbott Government. Our first Budget will be the foundation of our Economic Action Strategy to build a stronger, more prosperous economy and a safe and secure Australia.

It is important though, for people across Australia to understand the challenges that we have faced as a Government and the challenges that we are facing as a nation as we have put this first Budget together.

Labor in 2007 inherited a strong economy and a strong Budget. They left us, they left the country, with a legacy of deficits and debt as far as the eye can see and with a spending growth trajectory which is unsustainable. $191 billion in actual deficits in their first five Budgets. $123 billion in projected deficits in their last Budget. Government debt heading for $667 billion.

Today I am releasing a detailed summary of Labor’s failures in government, to help inform the public debate in this final week before the Budget. This document has been put together by my good friend and valued colleague, the Member for Higgins, Kelly O’Dwyer.

After 6 years of Labor, Labor left Australia with the bill. Labor now needs to face up to its legacy of deficits and debt and to its legacy of having left the country with a spending growth trajectory which is unsustainable. Labor should now work with the Government as we take responsibility and as we are working hard to fix the mess they have left behind.

Happy to take questions.

JOURNALIST: Were ministerial staff used in the preparation of this document? This political document.

CORMANN: This document has been put together by, as I have said, my good friend and valued colleague, Kelly O’Dwyer…interrupted

JOURNALIST: Were ministerial staff used in the preparation?

CORMANN: The answer is no. This document was put together by my good friend Kelly O’Dwyer based on information that is available in the public domain and it was printed…interrupted

JOURNALIST: Who paid for it?

CORMANN: If you relax a bit, I will actually answer your question before you interrupt my answers. The answer is it was printed by the Liberal Party.

JOURNALIST: Will the Government be going ahead with the debt levy?

CORMANN: We have been working very hard for seven or eight months now. Working through the information in front of us. Working through the numbers. Analysing the situation Labor left the country in. Making decisions on what we need to do in order to strengthen our country. Now we understand why there is a level of concern about the proposition that has been speculated about in relation to possible tax measures in the Budget. Coalition Members and Senators don’t like tax increases. This Government, this Cabinet, doesn’t like tax increases. We want to see lower taxes. In the Budget we will be delivering the lowest possible taxes given the challenge that we are facing, given the Budget situation that Labor has left behind.

One of our big commitments in the lead-up to the last election was to repair the Budget. We will be repairing the Budget. We will be pursuing structural reforms and structural savings and we also recognise that there is a need for an immediate, special effort, in order to put ourselves into a stronger starting position as we repair the budget. That special effort needs to be spread fairly and equitably. The only way you can ensure that you do that is by also considering appropriately targeted measures through the tax system so that higher income earners participate in the additional effort required to put Australia back onto a stronger trajectory.

JOURNALIST: Minister, can you be sure that somebody who loses government benefits in the Budget will not also pay a higher income tax?

CORMANN: Well you will have to see the details in the Budget next Tuesday and I will leave the Treasurer Joe Hockey of course to provide all of that detail in the Budget that he is bringing down next Tuesday. What I can tell you is that the Expenditure Review Committee of Cabinet and the Cabinet have worked very hard to ensure that the effort required to fix the Budget mess left behind by Labor is spread as fairly and as equitably as possible across all sections of the community.

We are focused on what is right for the country. If we were just focused on our political self-interest, we might not be having some of the conversations, some of the difficult conversations, that we have been having in recent weeks. But we are focused on what is right for the country and we have done everything we could to ensure that the effort is spread fairly and equitably.

JOURNALIST: Your own colleagues say this is a broken promise, why on earth should the public believe you when your colleagues can’t be convinced?

CORMANN: Well we understand why there is a level of concern. Coalition Members and Senators don’t like higher taxes. I don’t like higher taxes. We want taxes to be lower; we want taxes to be as low as possible. What we would ask people across Australia to do is to trust us. We have reviewed all of the information on coming into Government, we have worked very carefully through all that was in front of us and we have made the judgements that we think are necessary in order to strengthen the country, in order to build a stronger more prosperous economy.

JOURNALIST: But people were trusting you not to break your promises and now you’re set to break one?

CORMANN: I can assure you that when you see the Budget next week, you will see that we are delivering on all of the policy commitments that we took to the last election.

JOURNALIST: Senator Cormann would it be fair if high income earners are hit with a temporary levy, while low income earners and pensioners etcetera are hit with structural changes that increase over time? Will you also have long term structural things in the Budget that hit high income earners?

And second question, isn’t this really a book that political parties produce in Opposition? Don’t people, now that you’re in Government, know what you’re going to do not what you’re talking points about the other side?

CORMANN: Well in relation to your last question, we think that it is very important for people across Australia to understand the size of the challenge that we’re facing as a nation and why we’re facing that challenge. We think that this booklet which I’ve released today is an important part of the public conversation in this final week before the next Budget. We are not doing any of this for fun, we’re doing it because in our judgement, it is necessary to strengthen our country.

Now in relation to spreading the effort, of course we are focused on both structural reforms and savings and on the special immediate effort. Now the virtue and the downside of structural reforms and structural savings is that they start low and they build over time. We do need to get the Budget back into surplus as soon as possible because if we don’t, what we are really doing is we are continuing to borrow to fund consumption today. We are continuing to force our children and grandchildren to pay the price for our consumption today with interest. That reduces opportunity in the future. We want to improve opportunity in the future which is why the Budget next week will be about a new age of opportunity.

JOURNALIST: Will those long-term measures hit high income earners as well?

CORMANN: Our focus is on a strong and fair Budget.

JOURNALIST: When there are very weak retail sales. Yesterday, a very big drop in consumer confidence, are you worried at all about what the impact might be from income tax increases on consumption, on the economy?

CORMANN: We have very carefully weighed up all of the information in front of us and you can rest assured that we have had the best advice available to us and the Budget that the Treasurer Joe Hockey will be releasing next week will be a growth Budget. It will be a Budget to build a stronger, more resilient, more prosperous economy, where everyone has the opportunity to get ahead.

JOURNALIST: Senator notwithstanding the title of this and the contents of this book, do you concede that one of the things that you have to tackle next Tuesday is the last desperate act of the Howard Government in 2007 when they gave $34 billion worth of tax cuts. In fact, the perhaps foolishness of the Rudd Government in nearly adapting the lot?

CORMANN: When Labor won Government in 2007, they inherited a strong economy and a strong Budget. After six years of Labor what we’re looking at is $191 billion worth of deficits in their first five Budgets, $123 billion worth of projected deficits over the forward estimates in their last Budget and government debt heading for $667 billion. We must turn that situation around and we are making the decisions that we need to make.

JOURNALIST: Were those tax cuts that were implemented by Labor prudent?

CORMANN: Well Labor did a lot of bad things. Labor was a bad Government. Labor left the country in worse shape than they found it and we are taking responsibility to build a stronger economy and a more prosperous, more resilient economy.

JOURNALIST: Professor Sinclair-Davidson last night was saying that if you do press ahead with this levy, this will be Tony Abbott’s Julia Gillard moment and it will be a disaster for this Government.

CORMANN: I don’t accept that at all. We are very focused on making the right decisions for the right reasons for the country. We are not doing any of this for fun. We’re not doing this because it gives us any pleasure. We are doing it because in our judgement, having reviewed all of the information, it is the right thing to do for the country. We will explain ourselves to the Australian people in the lead-up to the Budget, on Budget night and of course the weeks and months that follow the Budget.

JOURNALIST: Senator, what is your reply to Peter Costello’s critic of the proposed increase of taxation?

CORMANN: Peter Costello was an outstanding Coalition Treasurer who provided distinguished service to Australia. He also was confronted by a Budget in a mess left behind by a Labor administration. In his first Budget, he made it very clear, I am now quoting directly from his Budget speech: ‘The tightening measures have to be fairly shared. We cannot expect those who rely on pensions and allowances, low income earners to bear the cost. So we must ask high income earners to make a contribution and business to make its contribution to”. We agree with Mr. Costello and if I can just add here, is Bill Shorten really suggesting that those in receipt of government allowances should carry the whole burden of fixing Labor’s Budget mess? Or does he agree with us that the effort ought to be spread fairly and equitably across the whole community?

JOURNALIST: Costello now regrets the superannuation levy.

CORMANN: Well, the superannuation surcharge was in place for nine years. Faced with the same challenges back in 1996, Peter Costello made the judgment that we think was right at the time and that we think is right now that any effort to repair the Budget mess left behind by Labor ought to be spread fairly and equitably across the community and ours will be a temporary measure.

JOURNALIST: Wasn’t that the problem? That it was in place for nine years? Are you planning to keep a so called temporary deficit levy in place for up to nine years?

CORMANN: The Treasurer will release all of the details on Tuesday. Let me assure you that it will be very clear that any special effort before structural reforms and structural savings kick in will truly be temporary.

JOURNALIST: Minister, given that you will have to cut costs, and break a few promises to get the Budget back on track and for equity sake with the potential deficit levy. Would it not be better to break a promise that would deliver a structural saving? For example some of the concessions on high income super?

CORMANN: We are working very hard to make the right decisions for the country. We are delivering a Budget that will deliver on all of the policy commitments that we took to the last election. And interrupted…

JOURNALIST: Well, that is not possible. Like not cuts to ABC.

CORMANN: Well, wait and see.

JOURNALIST: Minister Cormann, how many of the pre-election promises will be broken in the Budget?

CORMANN: We are delivering a Budget that will build a stronger, more prosperous, more resilient economy. And we are doing it in a way that will deliver on the policy commitments that we took to the last election.

Final question?

JOURNALIST: A lot of Liberal MPs are now speaking out saying that the Prime Minister isn’t listening to their concerns, they are being bombarded by phone calls from pensioners and so on. What evidence is there that the Prime Minister is listening to his own Coalition MPs?

CORMANN: The Prime Minister, the Treasurer, every member of the Cabinet is listening very carefully.

We all have worked very hard, very carefully, very methodically, weighing up all of the different options, all of the information in front of us and we have made judgments that we, in our judgment, think are in the national interest.

Now what we would ask our colleagues and what we would ask people across Australia to do is trust us that we are doing this for the right reasons. We are not doing any of this for fun. We are doing it because we want to build a stronger, more prosperous Australia and safe and secure Australia.

Thank you very much.

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