BARRIE CASSIDY, PRESENTER: Now we'll go straight to our program guest now and this week it's the Minister for Finance, Mathias Cormann, who joins us in the early hours from our studio in Perth.

Good morning, welcome.

MATHIAS CORMANN, FINANCE MINISTER: Good morning, good to be here.

BARRIE CASSIDY: Now you seem to be saying two things at the moment, that there is, remains, a budget emergency, but you're in no hurry to fix it. Now that does seem to be a contradictory position?

MATHIAS CORMANN: We inherited a budget emergency from the previous Labor government and we are working in an orderly and methodical fashion through usual processes of Parliament to fix it.

Labor left behind $123 billion in projected deficits in their last budget on top of $191 billion in cumulative deficits in their first five budgets and they left behind a spending growth trajectory which, if unaddressed, would take us to $667 billion of debt and growing beyond within the decade.

Now the budget is our plan to repair the budget and, of course, if all of the measures in our budget are adopted, we will be able to reduce debt within a decade by nearly $300 billion down to $389 billion. That is even taking into account the requirement for us to make some adjustments along the way for the effects of bracket creep.

BARRIE CASSIDY: You've made the argument there you can describe this as an emergency, but why no rush? You have used those words yourself, there is no rush.

MATHIAS CORMANN: Well, what I've said is there is no rush to deal with specific structural reforms which do not take effect until one July 2015, early 2016 or, indeed, not until 2017. It has always been thus that, in relation to structural, medium to long term reforms, you obviously deal with them sequentially and in a prioritised fashion in a Senate. The Senate has never ever dealt with every bit of budget legislation on day one. Indeed by the time we went to the last election, Labor still had not initiated legislation in relation to budget measures two budgets ago.

So as far as we are concerned, we are dealing with things as quickly as we sensibly can, bearing in mind that we have until June 30, a that was Senate controlled by Labor and the Greens, with Labor and the Greens both playing politics.

Labor is opposing savings, $5 billion in savings that were initiated by Labor in government, Bill Shorten is now opposing them. The Greens are telling us they are in favour of regular reductions in the excise on fuel.

That was the Senate we had to deal with until 30 June. We've had two weeks of the new Senate so far. The first two weeks were always going to be dominated by the carbon tax repeal, which has gone as promised, and the mining tax repeal, which is still a work in progress.

So the point we are making is the budget situation we inherited is very serious. The spending and debt growth trajectory we inherited is very serious and needs to be addressed. We are focused on repairing the budget as we promised, but we're doing it in an orderly, methodical fashion as we insist we must.

BARRIE CASSIDY: You insist it is orderly?

MATHIAS CORMANN: Absolutely. I mean look, obviously as we work through the implementation of the budget, inevitably there is going to be noise, a level of conversation seeking to scrutinise the decisions the Government has made and why and that is appropriate. But from our point of view, at the end of the day, what are we focused on? We delivered the budget. We are now working through the usual parliamentary process to implement the budget measures we think are necessary in order to protect our living standards, in order to build opportunity and prosperity for the future.

BARRIE CASSIDY: The Prime Minister uses the fireman analogy, that when there is an emergency, the firemen turn up and from that moment on, you start to get it under control. That's not what's happening, is it? In fact, the fire is spreading.

MATHIAS CORMANN: That is not true. I mean we have started to get it under control. As the Prime Minister, myself and Joe Hockey and others have said for some time now, I mean a lot of the budget already... a lot of our budget, a lot of our plan to fix Labor's budget mess, has already gone through ...

BARRIE CASSIDY: I'm sorry, if the fire is the deficit, the deficit is still spreading, the fire is still spreading and when the firemen turned up, you threw fuel on the fire by giving the Reserve Bank $9 billion?

MATHIAS CORMANN: Which was very important. The Labor Party, in their desperation for more cash all the time, which they then wasted along the way, completely depleted the capital reserves of the Reserve Bank which was putting Australia under, in a difficult situation.

The position here is this: If we don't take corrective action, we are on track for government debt to increase to $667 billion within a decade and growing beyond that. We say that is not sustainable. We say that taking spending as a share of GDP to 26.5 per cent by 23/24, which is the trajectory that Labor put Australia on, is not sustainable. Look at the revenue raised as a share of GDP. Tax revenue as a share of GDP over the past 20 years has averaged at 22.4 per cent.

So there is a significant fiscal gap between revenue and expenditure. If we leave that gap in place, we will continue to increase the level of debt, which means we will have to continue to increase the level of interest, which means we continue to borrow from our children and grandchildren, forcing taxes up for them or imposing deeper cuts on them to pay for our lifestyle today. We don't think that's fair.

BARRIE CASSIDY: If we can stretch the analogy again, the firemen thing, and it is an easy thing for people to understand, that you turn up and start to put out the fire. Can you give the undertaking now that the budget deficit at the end of your first term will be smaller than it was at the time of the last election?

MATHIAS CORMANN: Well, if the budget is implemented, that will absolutely be the case. We inherited $123 billion worth of projected deficits in our last budget. We have brought that down to about $60 billion in projected deficits over our budget and, of course, if you look at the trajectory over the forward estimates, we are on a believable path back to surplus. That is working on the basis of more realistic assumptions than the Labor Party did.

You've got to remember, Labor in May last year delivered a budget which within 11 weeks deteriorated by another $33 billion. That was the story on Labor. They kept overestimating their revenue and underestimating...

BARRIE CASSIDY: You are talking...

MATHIAS CORMANN: ... their budget outcomes were always worse.

BARRIE CASSIDY: You are talking a lot about Labor, but the fact is you have made budget repair a key factor in what you plan to do.

MATHIAS CORMANN: Absolutely.

BARRIE CASSIDY: Yet, when I ask whether you can reduce - not wipe out the deficit and produce a surplus, but can you reduce the budget deficit in three years, your answer is: "maybe, if".

MATHIAS CORMANN: No. The answer is we have laid out our plan to put the budget back on a believable path to surplus. Where is Labor's plan? Does Bill Shorten still believe in a surplus.

BARRIE CASSIDY: You're in Government now, you're in Government now, so what's your plan?

MATHIAS CORMANN: Indeed.

BARRIE CASSIDY: And can you guarantee you will reduce the surplus... reduce the deficit?

MATHIAS CORMANN: What is our plan? Our plan is in the budget Barry. We delivered a budget in May which presents our plan to put the budget back on a believable path back to surplus and we are now working in an orderly and methodical fashion to implement that plan through the Parliament.

What I'm saying, though, is our plan is the only plan to fix Labor's budget mess that's on the table. Where is Bill Shorten's plan? Wayne Swan used to sell the virtues of budget surpluses. He never quite got there but at least he seemed to believe in getting the budget back to surplus. We haven't heard much from Bill Shorten at all about needing to get the budget back into surplus and, if he thinks it needs to get back to surplus and he doesn't like our plan, what is his plan?

BARRIE CASSIDY: We are not even talking about getting it back into surplus, we are talking about reducing the deficit from where it was at the last election. So you're saying that it's possible, if you can't achieve a breakthrough with the cross benchers and Labor and the Greens, then you might not produce it at all?

MATHIAS CORMANN: No. What we are saying is the budget is our plan to take us back into surplus on a believable and credible trajectory. Of course our budget is there for all to see. We are working to implement our budget. About half of all of our budget measures have gone through. Indeed, our biggest saving, our biggest single saving, which is a reduction in the funding growth in foreign aid to the tune of $7.6 billion over forward estimates, that went through as part of the appropriation bill. There's a whole range of other saving measures that went through as part of the appropriation bill.

So Senate passed the budget repair levy, even after Bill Shorten suggested that Labor would never support that, they quietly voted for it in the Senate.

So let's just wait and see what happens with the remaining immediate to long-term structurral reforms which come into effect progressively from 2015 onwards.

We will continue to work to repair the budget as we promised we would.

BARRIE CASSIDY: When the Prime Minister says if the budget is... if they're not allowed to implement the budget, there is the prospect down the track of increased taxes and higher interest rates, a Coalition Government would never allow that to happen, would you?

MATHIAS CORMANN: This is a statement of fact, though. We have laid out our plan to reduce the unsustainable spending growth trajectory that Labor left behind. If we were not able to reduce spending growth, and if we continue to stay on an unsustainable debt growth trajectory, obviously at some point that will have to be paid back.

Essentially, if we stay on a spending growth trajectory that takes us to 26.5 per cent of the share of GDP, when tax revenue on average over the last 20 years was 22.4 per cent of the share of GDP and you don't want to balance the books by reducing spending, then the only alternative to balance the books is to increase taxes.

And again, what is Bill Shorten's plan? Is he planning to increase taxes in order to make up for Labor's unsustainable spending growth trajectory?

BARRIE CASSIDY: Just finally, Martin Parkinson, the Treasury Secretary said you should have put some tax issues, some tax issues in the mix this time around. "We got it wrong" was the headline in the Finn. Do you now regret that you didn't say more about potential tax reform down the track and certainly tax reform that might impact on wealthier people?

MATHIAS CORMANN: I don't agree with him that we got it wrong. We are dealing with tax reform as we said we would in the lead up to the last election through the tax reform white paper.

In the meantime, we are doing exactly what we said we would do before the election, that is repeal the carbon tax, the carbon tax has gone, repeal the mining tax. We are quietly hopeful that we will be able to get rid of this bad tax soon and, of course, we will be reducing company tax by 1.5 per cent from one July 2015.

BARRIE CASSIDY: Minister, thanks for your time this morning.

MATHIAS CORMANN: Always good to talk to you.