PETER VAN ONSELEN:
Mr Hockey, thanks for joining us on the show.
TREASURER:
Great to be with you Peter.
PETER VAN ONSELEN:
Tough week, last week?
TREASURER:
Every week is a tough week as a Treasurer when you are the Government that is getting on with the job of fixing the economy.
PETER VAN ONSELEN:
The rhetoric was the problem though, wasn’t it? It wasn’t the essence of what you were saying; it was the choice of words?
TREASURER:
Look, Peter it is done. The matter is dealt with. We are moving on and focusing on the policies that grow the economy.
PETER VAN ONSELEN:
And I want to focus on the economy and the Budget in particular but just one last one on this: I suppose you came to prominence in political life during the Howard years as the popular Joe Hockey figure from Sunrise; are you worried that that Aussie bloke attitude and that factor about you is something that is at risk now because of the way rhetoric is being used against you?
TREASURER:
You know, you have got to be true to yourself and I haven’t changed, and my words haven’t changed in relation to meeting head on the challenge that the economy faces. Now, if people look at policy positions I’ve had over years they haven’t changed, there is a consistency. I deeply care about the quality of life I am going to leave my community and my family and that’s why we work overtime as a team in the Coalition to deliver a stronger economy and a more prosperous Australia.
PETER VAN ONSELEN:
Let’s talk about the Budget. Today, Glenn Stevens has in a sense endorsed the Budget as a whole; he wasn’t talking about particular aspects though, he made that quite clear. That’s the problem with the Budget though, isn’t it? When you look at individual aspects there are inconsistencies there, even if, on the whole, (inaudible) economists would tell you that it is taking the fiscal path in the right direction?
TREASURER:
Well, we met head on the challenge left to us by Labor and the starting point is, we inherited an economy that had below-trend growth, falling terms of trade, rising unemployment, depleted business and consumer confidence. That was the starting point, on top of a Budget that was in deficit – that was going to be in deficit for a decade.
PETER VAN ONSELEN:
You’ve got the endorsement for the pathway for that. I am talking about individual policies (inaudible) but in other areas you are not, like in PPL or not changing the promise, or breaking the promise on super concessions but looking to break the promise after the next election on pensions.
TREASURER:
Well, let’s go back: the fact is, we couldn’t go harder than we did to address the deficit and debt left by Labor because the economy was not performing as well as was to be expected. So, it is a very prudent approach to economic management, to lay down a trustworthy, predictable path back to surplus, so that we can start to address the legacy of debt left to us by Labor, but at the same time, ensure that we have jobs growth. In the Budget we have the biggest infrastructure program in Australia’s history and that is a huge program that is going to address some of the transitional challenges in the Australian economy. I am very confident that our infrastructure package, I am very confident that our reasonable measures to get the Budget back to surplus will all add together to deliver a more prosperous nation (inaudible).
PETER VAN ONSELEN:
Is this going to be the major issue for the next election: the economy? It seems like the Government spent more time recently, for other reasons of course, talking about national security, in your view, is the economy going to be what decides, and economic management what decides the next election, fundamentally?
TREASURER:
Well, the next election is still two years away. So, I…
PETER VAN ONSELEN:
What you do between now and then; what the Government’s runs on the board end up being, do you think that is the central issue?
TREASURER:
Look at where we are. We promised we would get rid of the Carbon Tax and we’ve done that. We promised that Australia would be open for business; we have signed free-trade agreements with Korea and Japan. I am confident by the end of this year, we will sign a free-trade agreement with China – a remarkable achievement, a remarkable achievement in just over 12 months.
PETER VAN ONSELEN:
But these are all bi-partisan achievements.
TREASURER:
Well no, no, I am sorry. Labor had the chance to do it for six years but did not. We can talk bi-partisan…
PETER VAN ONSELEN:
But that is just timing isn’t it? They were slowly working towards the completion and you guys…
TREASURER:
It was an englacial pace under Labor. They failed to deliver; we are delivering. We said we would get rid of the Mining Tax; we are in the process of doing that. We said we would build the infrastructure for the 21st century and that Tony Abbott would be the infrastructure Prime Minister; that is being delivered.
PETER VAN ONSELEN:
On the Mining Tax, let me ask you about some of the compensation that goes with it because it strikes me that there seem to be two narratives that are developing. One, where I have certainly heard Mathias Cormann, the Finance Minister be very strong in his rebuttal in this idea that you would retain, and do a deal to retain the compensation attached to the Mining Tax but then I have seen reports suggested to be coming from inside the Coalition that you might do a deal?
TREASURER:
Don’t believe everything you read, Peter. Even if you write it, don’t believe it.
PETER VAN ONSELEN:
I didn’t write it but you are 100 per cent with the Finance Minister on this?
TREASURER:
Well, of course I am because we are in the engine room of the discussions and the fact is, we went to not just one election, but two elections saying that we were getting rid of the Mining Tax and its associated expenditure. So, we have a very clear mandate.
PETER VAN ONSELEN:
So, if you can’t get rid of the associated expenditure, the Mining Tax stays; you don’t want that but they go hand in glue?
TREASURER:
We have to deal with what we have got but there is no doubt that we have a mandate in this regard and in fact, a number of Senators, independent Senators were advocates for getting rid of the Mining Tax and its associated expenditure. So, we are dealing with that now.
PETER VAN ONSELEN:
How do you deal with this collection of crossbenchers in the Senate? I mean, someone like Jacqui Lambie was only yesterday, I think that she was all but calling for a doubling of the defense Budget to ward off China, a China invasion, no less. How do you talk to such a disparate collection of Senators and try to convince them of what you are trying to do?
TREASURER:
Well, the starting point is to treat each of them with respect. I mean, you always…
PETER VAN ONSELEN:
But you can’t treat those sorts of comments with respect (inaudible)?
TREASURER:
Well, no you might disagree with comments from time to time but the starting point is, they are Senators, whether it be the Labor Senators, the Greens or independents, the starting point is that you work with them. You want to work with them. Now, we want to work with all the Senators. The Labor Party have decided that they are going to be debt deniers, they are going to forget the terrible legacy they left for Australia and they are going to simply oppose everything, well, that is their call. Sooner or later if they want to be treated seriously, they are going to have offer an alternative and obviously they don’t have one. The Greens, well they are entirely inconsistent as well. So, that is why we returned to the eight independent Senators and three of them are in the Palmer United Party.
PETER VAN ONSELEN:
What is your impression of the Palmer United Party? Do you think they are going to vote as a block or do think that they will pair off?
TREASURER:
Well, I am assuming they will vote as a block.
PETER VAN ONSELEN:
And you are approaching the negotiations that way?
TREASURER:
Yes, but also we are speaking with everyone and also, providing everyone with the opportunity to fully appreciate the position we have inherited. I mean, do nothing is not an option. ‘She’ll be right’ is not a policy and that is the Labor Party approach; that is the Greens approach. It cannot be Australia’s approach. And why? Because If we do not take action now Peter, we are going to end up with $25,000 of debt in ten years for every man, woman and child in Australia. We are going to spend $3 billion a month in interest on the debt; 70 per cent of that goes overseas. And all that does, is it leaves us with a burden that means that the medicine to address it is going to have to be far more significant than what it is today.
PETER VAN ONSELEN:
But you won’t get any argument from me. We are spending more than we are earning, so we have either got to cut spending or put up taxes. Where the argument seems to be is where the choices that the Coalition have made were to make these adjustments and also some spending initiatives like the PPL. Yes it was taken to an election but...
TREASURER:
But it is fully funded – the PPL – so let’s deal with that. We need to increase workforce participation by woman. Now, if we increase – according to the Grattan Institute – if we increased it to the same level as Canada, it would add $25 billion to the Australian economy. So, as our population ages – and we should all celebrate that you know, living longer, that’s terrific – but as our population ages, the proportion of people of working age is going to decrease. So, we need more people to participate, particularly women. Now, you have got to have childcare that is affordable, flexible and accessible and you have got to have wage replacement in paid parental leave. Now, a lot of businesses and the public sector offer wage replacement. A lot of big businesses; small business doesn’t because small business can’t afford to offer replacement wages. So, we, through our PPL Program, we are offering small business the biggest leg up they have ever had. We are giving them the same entitlement as big business but they don’t have to pay because big business is going to pay for the Paid Parental Leave Scheme.
PETER VAN ONSELEN:
There is potentially an irony in the way the Deficit Levy has been brought in. Originally, the concept of it was so that upper-income earners were going to wear pain as well because it was lower-income earners that were getting assisted benefits pulled back. It may well be that you don’t get any of that through but…
TREASURER:
Well, the Deficit Levy has gone through…
PETER VAN ONSELEN:
That’s my point; the Deficit Levy has gone through. So, it may well be a very natural constituency for the Coalition that has already (inaudible) a 2 per cent tax increase but then that was then offset by other elements of the Budget that just don’t pass the Senate.
TREASURER:
Well, don’t write those initiatives off because as we said today, as Mathias Cormann, myself, the Prime Minister said today, the day-to-day bills are being paid, the day-to-day money in the Budget is being done; most of the Budget has passed through the Senate. We are now dealing with the structural challenge left by Labor.
PETER VAN ONSELEN:
Let me ask you about that: the story on the front page of The Australian today, ‘Treasury sinks Budget crisis talks’. So, most of the Budget has gone through, nearly 90 per cent of it, if I am reading it correctly, or it was 98 per cent, wasn’t it? 98.9 per cent – only one per cent but in dollar terms that is tens of billions of dollars for you, that’s the big stuff.
TREASURER:
And it also builds over time, the key is, it builds over time to address the legacy that Labor left of $667 billion so we can reduce that by more than $300 billion by passing measures now that ensure that our welfare system is sustainable, our health system is sustainable, our higher education system is competitive, building a Medical Research Fund that delivers something everyone aspires to, which is a better quality of life.
PETER VAN ONSELEN:
You have to explain the Medical Research Fund to me because I constantly hear the narrative that we need the Medicare co-payment because health is unsustainable but that money is not going back into the health Budget, it is going into a Medical Research Fund?
TREASURER:
Well, it does go into the health Budget but over time. So, if you make savings now in health, every dollar of savings we make in health goes into a fund and that fund will build up over time and then the earnings on that fund, which will be managed by the Future Fund, the earnings on that fund, will go directly into medical research. Now, through medical research – additional new medical research, we can find the cures for Dementia and Alzheimer’s, for brain Cancer and a range of other things.
PETER VAN ONSELEN:
Is that really the most efficient way to do that? I mean, there are already so many research bodies doing it?
TREASURER:
I truly believe Australia can be the equivalent of Silicon Valley for medical research but we have to take a bold step. Now, Australia is building up government funding to around a billion dollars a year in medical research but still, a lot of our researchers take their inventions – if you like, and take them to clinical trials overseas and get commercialized overseas. We can do it here but we have got to invest.
PETER VAN ONSELEN:
So, are you committed to, if say, the Medicare co-payment is forced down from $7, there is some speculation that it might be, the Health Minister has said he is open to the debate – if that is the case, are you still committed to whatever the new price might become, still going into the medical research fund? Is that a locked in guarantee?
TREASURER:
Well, these are part of the discussions that we have but the Medical Research Fund…
PETER VAN ONSELEN:
But locked in for you, though? Because $7…
TREASURER:
The reason why we are undertaking the Medical Research Fund is to deliver sustainable funding for the development of the cures that are going to make our quality of life better.
PETER VAN ONSELEN:
If it drops to $3 or $5 instead of $7…
TREASURER:
You are asking me to speculate and I am not going to do it, Peter. Nice try, you are very good at this Peter but I am not going to speculate.
PETER VAN ONSELEN:
Let me ask before we run out of time: the inconsistencies, which I have eluded to a couple of times in the Budget; why, if you are going to look to break the promise – if you might word it that way – you made on the pension after the next election in terms of implementation, why not also look at eligibility of the pension for people that are perhaps in a higher-income category that…
TREASURER:
Well, I don’t accept the premise of your question, right? We are taking it to another election so our commitments on pensions…
PETER VAN ONSELEN:
Well, you have tried to legislate it before…
TREASURER:
We haven’t said that so you shouldn’t assume that but we are taking that to the next election. So, we are not breaking any promise in relation pensions, at all. And the fact is actually, pensions are increasing by inflation, the last increase was due to inflation rather than to average male weekly earnings because inflation was the higher rate than the change in average male weekly earning. So, of course, because it was higher, the pension increase was delivered and they will continue to be delivered. Pensions will go up twice a year; there is no argument about that. And they are going to keep rising. In fact, the Carbon Tax compensation associated with pensions was kept in when we got rid of the Carbon Tax. So, pensioners are significantly better off under what we delivered. The challenge going forward is to make sure that everything we currently have in welfare, in health, in quality of life, is sustainable into the future and if we get the Budget right, we can make it better.
PETER VAN ONSELEN:
Well, I think that is the big challenge, right? I have described the Budget as the necessary housekeeping but the reforms that are necessary have to come next and it is whether the Government has the political capital to go after those reforms. I have got a sneaking suspicion that you have always hoped to go after bigger reforms post the housekeeping of the Budget. Is that on the agenda?
TREASURER:
Well, there cannot be any finishing line on reform; you never get there.
PETER VAN ONSELEN:
So, what areas would you be looking at?
TREASURER:
Well, we have already said that we are going to have a look at the Federation, we are doing that, the Prime Minister has announced terms of reference – the Federation White Paper.
PETER VAN ONSELEN:
Industrial relations, IR?
TREASURER:
Well, we said, workplace relations, we said there would be a productivity commission review and taxation is increasingly top of mind. And in relation to taxation reform, so much depends on what the state of the Budget is and we are facing significant competition. You have got company tax rate in the United Kingdom going to 21 per cent and Australia is of course, 30 per cent, going down to 28.5 per cent.
PETER VAN ONSELEN:
We also have one of the highest income tax rates in the world and you have just added to it.
TREASURER:
Well, that’s right. New Zealand is 33 per cent in comparison with Australia. So, the bottom line for us is, we need to keep an eye on the competition but we also need to fix our Budget. Now, New Zealand can be more generous because they are about to deliver a surplus Budget. We are quite away from a surplus because of the legacy left by Labor. I am very focused on fixing our own house and that we have money in the bank that gives us options for further reform that strengthens the Australian economy.
PETER VAN ONSELEN:
Final question, Mr Hockey: when you do deliver a few more Budgets in the lead up to the next election and are ultimately judged on – in a sense – how close you got to some of the goals you set on this pathway back to surplus, are you worried that if you don’t meet those targets, either because of economic conditions or because you aren’t able to get the entire package through the Senate, that you will be judged on that and judged harshly?
TREASURER:
Well, from my perspective, we have got to do everything we can to ensure the quality of life we leave to Australians is better than the quality of life that they have today. That’s what we are working on and that comes down to jobs, jobs security, making sure the Government lives within its means, opening new markets through the free-trade agreements, getting rid of red tape, reducing the tax burden; doing everything we can to ensure that people, with confidence, can invest and grow their lives.
PETER VAN ONSELEN:
Joe Hockey, thanks for your time.
TREASURER:
Thanks Peter.