• Transcript, E&OE
Topics: Finance Minister appointment; Federal Budget 2020.
09 October 2020

David Penberthy: Congratulations to our next guest, he’s got a brand new job coming up at the end of the month. South Australian Senator, Simon Birmingham, set to become the Finance Minister and leader of the Government in the Senate. Senator, good morning to you.

Simon Birmingham: Good morning guys, great to be with you.

William Goodings: Congratulations Senator, this is a terrific promotion for you. But we started the show chatting about what it potentially could mean, I know that you obviously have to wear a national hat, being a member of the National Cabinet. But, it’s good to have a South Australian in such a senior role.

Simon Birmingham: Thanks guys. Well, it is a hugely important role and the Finance Minister sits at the center of decision making, of course, of the Government’s Expenditure Review Committee, but also on the National Security Committee of the Cabinet. And so, it gives an insight into all areas of decision making and an opportunity to contribute there. You’re right, it’s first and foremost, of course, a national responsibility to lead the nation and that’s what I think all South Australians would understand as well. But of course, you always have an eye out for your home state where you can. I’m here as a Senator for South Australia and always very mindful of that too.

David Penberthy: So does that mean there could be potential for you to get yourself into the odd squeeze? I mean, when it comes to things like allocation of GST to the states, which is always a fraught thing.

And obviously, Rob Lucas had a bit of a frown the other day when he found out that he was going to be $1.3 billion short?

Simon Birmingham: I think, one of Matthias Colman’s lasting legacies will be the fact that he settled many of the disputes between the states about how GST is allocated, in terms of, together with Scott Morrison, he works through a really good process to refine parts of that allocation formula, but it is done by a formula. And of course, all states are taking a haircut in GST revenue this year, because when you do, as the country had to in terms of shutting down large parts of economic activity and people can’t spend as much as they normally would, well your GST revenue will drop. But that’s the same challenge we’re facing in terms of the federal budget; that so much of the revenue decline we’ve got is attributable, in a sense, to why we’ve got the budget challenges we have. But it’s not just a case that we are spending more. Yes, that’s the case and we’re doing it because we want to make sure we have cushioned the blow of COVID and that we help create jobs out of it. But we’re also receiving a lot less revenue as governments right around the country – the states, in terms of GST revenue; us, in terms of the collapse in company tax and income tax, whilst at the same time there’s a huge growth in terms of payments out in supporting people and businesses.

David Penberthy: $213 billion deficit, $1.3 trillion debt by 2020. The Coalition, for as long as I can remember, has said that a balanced budget and a surplus budget are the markers of prudent economic management. Given we now live in this post surplus era and we’re going to do so for the next decade, what’s the metric by which we can assess good economic management now?

Simon Birmingham: It really comes down to the quality of spending and also still recognising that you do want to make sure you structure decisions in a way that can enable you to get back to balance over time. Now, that’s going to take a long period of time from the depths of the crisis that we have entered and we acknowledge that. It’s one of the reasons right at the outset of this crisis, that we said as a government that spending needed to be temporary, as well as targeted and proportionate to the circumstances. And so, the types of decisions we’ve made have all largely been time limited. The spending is overwhelmingly just in the couple of year period that we’re looking at here and then it tapers off quite strongly. Because what we want is to get back to a circumstance where the economy drives, indeed, government revenue back to a more sustainable level, and that spending comes back down as we get people off of welfare, back to work, and as we don’t need to have the type of emergency measures that we’ve had in place for the pandemic.

David Penberthy: But does that mean then there’s no chance you’ll adopt Labor’s childcare measure, given it doesn’t have a natural end date?

Simon Birmingham: Well, Labor’s childcare measure, you’re right, doesn’t have an end date. It’s one of the things that Labor did last time they were in office, which was to undertake spending decisions that were indefinite and baked in forever. And so, that’s why it took six years when we came to office to slowly get spending under control, raise revenue by having a stronger economy and therefore be able to come into this pandemic with a balanced budget. Now, the big problem with Labor’s childcare policy is that it gives thousands of dollars extra to families earning the most and to families earning more than $350,000 a year. And we already pay 85 per cent of the childcare costs for families earning the least and the reforms our government put in place, when I was the Minister, for childcare system, put in place a system that ensured that those families who are earning the least get the greatest amount of subsidy. Those people working the most hours are entitled to the most hours of childcare subsidy. The subsidy tapers off for very, very high income families, but targets at the low income families. Most of Labor’s support is going to end up being a beneficiary to those earning the most already.

David Penberthy: Sounds like [indistinct] is the inverse position that you guys hold when it comes to the stage three of your proposed tax cuts?

Simon Birmingham: Well, the tax cuts are about creating the right environment for incentive to work more; to be able to recognise that, as we’ve always said, we want to keep taxes low as we possibly can. And in that sense, we are trying to give everybody that 30 cents in the dollar tax opportunity, except for very high income earners. And so, the reforms we’re putting in place there of bringing down tax rates and extending out the 37 in the dollar tax bracket is an important thing. And you know what? It will benefit the same families that Labor is talking about. Sure. So, they can receive that benefit and that is providing them with a gain. But, it doesn’t adjust your incomes in terms of the tax rate that is applicable to dollars earned above $360,000 a year. That’s what Labor’s talking about doing though.

David Penberthy: Just before we let you go. This isn’t really a political question, it’s more of a how does it work question, something I’ve never really fully understood. What’s the relationship between the Treasurer and the Finance Minister? Are you like this sort of last line of defense against sort of crazy fiscal collapse on account of a Treasurer spending too much money? Are you the ultimate naysayer, how does it operate?

Simon Birmingham: It’s probably most easily explained in a sense, it’s a bit of the external versus the internal. So, the Treasurer is responsible for the economic management of the country, the things that are external to government. But of course, government policy setting plays a huge role in terms of driving the economy. The Finance Minister is responsible for the internal management of government; government finances and spending and making sure that departments do live within their budgets and that we do have thorough scrutiny of all those spending decisions and make sure the quality of spending is there. But –

David Penberthy: So, you’re sort of like the nation’s accountant?

Simon Birmingham: Finance Ministers are frequently known for having to say no a lot. And so, I’ll be sharpening up on my two letter responses to colleagues.

David Penberthy: Well as long as you say yes to things like putting all the subs jobs in SA, you’ll have our support. That would be good.

William Goodings: Good luck in the role.

David Penberthy: Absolutely

Simon Birmingham: Thanks so much guys.

William Goodings: Cheers. The South Australian Senator, Simon Birmingham, set to become the new Finance Minister and the Government Leader in the Senate.