PRESENTER:
Treasurer Joe Hockey is in our Parliament House studios. Treasurer, good morning.
TREASURER:
Good morning, Fran.
PRESENTER:
We'll come to debt in a moment, Treasurer, but departures first. Kevin Rudd goes, you forged a friendship with Kevin Rudd. You even tramped the Kokoda track together. Are you sorry to see him go?
TREASURER:
No, because he was a formidable political opponent. Having said that, I totally understand why he is going. He has had a tumultuous political career. He has seen the great highs and the great lows of Australian politics. The most brutal words about Kevin Rudd have come from his own side and the most brutal actions against Kevin Rudd have come from within his own party. I fully respect his decision to go. I understand it. I understand it particularly because I know Therese, his wife, he has got three magnificent children, hugely impressive children. He has got a very young grand-daughter, I know he was feeling the pain of being away from his grand-child. I fully understand the sacrifices his family has made and I have sympathy towards that and I understand why he is going.
PRESENTER:
You sound a little bit emotional there. Is it emotional for you seeing the terms of him going, thinking back to how it all was for you?
TREASURER:
No. Politics has changed. It is more brutal. I do not think it is more brutal in the chamber. I think it is more brutal on the streets. Social media has changed things. People feel that they can give you a character reference by screaming across a car parking lot in front of your children which I have experienced. I do not think we should just be gentler in the Parliament, I think as a community we must be gentler to each other.
PRESENTER:
What was the political lesson for you, from Kevin Rudd's Prime Ministership?
TREASURER:
You have to take your team with you. You have to work with your team. The position of Prime Minister is not that of emperor. You can never be so arrogant as to think that the Australian people will love you no matter what you do to them. You have got to take the people with you. I think Kevin Rudd fell first time around because of the contempt he held for people in his own ranks. He just completely misjudged the Australian people. I think one of his great strengths was his ability to withstand the bullets. He has a formidable intellect. His weakness is that when he made a decision he thought the decision would just be implemented. The Emissions Trading Scheme is a classic case in point. He stopped prosecuting the argument and because he was winning the political battle in Parliament he did not realise he was losing the community on the ETS. He gave up fighting it on the airwaves and instead sat back and watched us tear ourselves apart. He thought that was great. But the bottom line was that when Copenhagen fell apart, his great moral challenge came to an end. I think you cannot have wavering values when it comes to significant issues in politics and I think at times he did.
PRESENTER:
Just before I leave this and move onto the debt, Kevin Rudd said that he hopes that he is remembered for the way his government navigated Australia quote, 'through the worst global economic crisis since the depression, without recession, without the scourge of mass unemployment and with our AAA credit rating intact.' Is he right to hope and presume that history will see him in that light?
TREASURER:
I am not a history commentator, I do not write history. Hopefully, I can help to make it.
PRESENTER:
Is there a fair hope from your view?
TREASURER:
Australia has seen through the GFC. But I tell you what, every other country in the world would love to have inherited the starting point that Kevin Rudd inherited. That is the bottom line. He never properly gave credit to his predecessors for leaving Australia in an unbelievably strong position to go into the GFC. I mean an unemployment rate with a 4 in front of it. $60 billion in the bank, no Government debt and surpluses as far as you could see and, by the way, had the best terms of trade in a hundred years. There were a whole lot of factors in play, but frankly, I would prefer to recognise his magnificent recognition of the stolen generation. I think also that the issues that he said he holds dear now I think he held dear previously as Prime Minister. For example, on the organ donor registry and his work on the international scene. I think his knowledge of what happens globally is without peer in Australian politics. I do not necessarily think all his decisions were right but his knowledge is certainly without peer.
PRESENTER:
Joe Hockey, to move to the debt ceiling. The legislation that went through the Reps last night. The current debt limit will be breached on December 12. What happens on December 13 if the debt ceiling is not lifted to $500 billion?
TREASURER:
We are currently seeking advice on what that means. There are a number of challenges associated with that. Labor knew the debt was going to hit $300 billion before Christmas. They said it before the election and then they said that that would be the responsibility of 'someone' after the election. This is 'someone' sitting before you on your program. We have inherited this mess. The mistake was that Labor saw the debt limit as a target rather than a limit. They were the ones that introduced a debt limit. In 2008 they beat their chest and said, 'fantastic, we are going to have a debt limit for the first time.' Australia never had one. They put in place $75 billion. Then the GFC came along and they said, 'No. We are not going to abolish it we are just going to increase it to $200 billion because we will never get there.' Then they got to $200 billion and they said, 'we will increase it to $250 billion, we will never get there'. They got to $250 billion, then they said , 'well, we will increase to $300 billion and we will never get there'. Now they are trying to blame us for getting to $300 billion.
PRESENTER:
Now you are trying to lift it to $500 billion and you are saying, if Labor doesn't agree to that, you know, are they so heroic that they are, to quote you, go down the path of savage closed down government services.
TREASURER:
The difference is …
PRESENTER:
Are you seriously threatening to shut down Government services?
TREASURER:
There is no choice…
PRESENTER:
If you don't get your $500 billion?
TREASURER:
I am sorry, there is no choice. If Labor prevents an increase in the debt limit there is no choice but to start having massive cuts to Government expenditure, because the Government is running on borrowed money. That is what we inherited. Now, the problem was, Labor has peak debt going to $370 billion, but they left us with a debt limit of $300 billion. Even last year, Wayne Swan tabled in Parliament, unprecedented stuff, tabled in Parliament advice from the Treasury that said, you need to have a buffer between what the debt will actually reach and what the debt limit is so that the markets can properly deal with the refinancing of government debt. He said, 'that buffer has to be $40 billion to $60 billion. They leave us with peak debt of at least $370 billion. Then the buffer of $60 billion. So that is $430 billion, but they have given us a debt limit of $300 billion. So what am I meant to do if I want to offer stability and certainty and predictability to the budget and to the financial markets about the Australian debt position? I give us a debt limit that we never want to reach.
PRESENTER:
It's an argument, isn't it an argument about quantum and timing though? I mean as you say it is going to rise to $370 we are talking by 2016 there. Labor says tonight you can have the debt ceiling raised to $400 billion tonight, why not take that and run? That will be plenty of buffer for now.
TREASURER:
You have got longer dated debt.
PRESENTER:
Yeah, but when do you hit that?
TREASURER:
We have got refinancing debt. As interest rates rise, the cost of us financing our debt increases. We have also had a deterioration in the Budget since the last update from Labor.
PRESENTER:
But by your reckoning, and you know the figures, when is it going to hit $400?
TREASURER:
If I can just finish, there has been a deterioration in the budget since the last economic statement from Labor that said peak debt at $370 billion. We have identified a whole range of cost problems that Labor did not address. From $8.8 billion that had to go into the Reserve Bank Reserve Fund, to deal with the risks of investments associated with the Reserve Bank on behalf of the nation, through to the fact that the ACCC has not been funded for future years. They are going to run at a loss this year. In addition, Labor has said that they are going to oppose our debt reduction initiatives, such as abolishing the $10 billion Clean Energy Finance Corporation and abolishing the mining tax and associated expenditure which will reduce the debt by $13 billion.
PRESENTER:
Treasurer, understanding all that and all those pressures, but politics is often said as the art of the possible. If you are facing hitting a debt ceiling on December 12, Labor are saying to you that can have the rise to $400 billion now and then get MYEFO out of the way that's coming out in December and then come back and get the extra.
TREASURER:
Because they are playing games. If they want to own the cuts in the Budget, they will own them. It is their Budget that I have inherited. It is the Budget position and the debt position that I have inherited that I am trying to deal with. Labor wrecked it in government and now they are trying to wreck it in Opposition as well, if they do not understand. At some point in politics, you have to accept personal responsibility for your actions. What Labor does not understand is that they have left us with a mountain of debt and now they are not letting us fix it.
PRESENTER:
But isn't it political that you don't want to do this in two steps? You want to get it all raised now so you don't have to come back to the parliament in a year and suffer the sort of political barbs that you'll get by having to, you know, you can hear the lines now, you're practised in them, running up the debt card. You want to avoid that political pain don't you?
TREASURER:
We did not run up the debt here is a revelation…
PRESENTER:
No, I'm saying that that's the sort of commentary that will come.
TREASURER:
I know, but you see, we are not the ones responsible for this. What Labor is going to do is they are going to oppose all of our savings. They have started already. They are opposing the mining tax savings, $13.5 billion. We took them to two elections. They are opposing us closing down the Clean Energy Finance Corporation, $10 billion of borrowed money. This is what they are trying to do. They are playing an irresponsible game. If they want to keep doing this, it is their call. Their hypocrisy is not lost on the Australian people. They created the debt. They are the ones who have delivered the debt and deficits. Now we are trying to fix it and now they are trying to stop us.
PRESENTER:
Now a couple of quick ones if I can make it before the news. Christine Milne, the Leader of the Greens, has said she will back $500 billion potentially, if the Treasury Secretary, Martin Parkinson, makes a compelling case for the new limit when he appears at the Senate Estimates tomorrow.
TREASURER:
I do not think he is appearing tomorrow.
PRESENTER:
Next week, I beg your pardon. Does it give you hope the Greens could be won over, or would you like to organise a meeting with him now and the Greens?
TREASURER:
Whatever case, I do not mind. She can set whatever benchmark she likes because she is a complete hypocrite, having said that there should be virtually no debt limit when Labor were in Government. Now when we are trying to deal with the debt the Greens and the Labor party created, they are setting this new benchmark in fiscal prudence. That is OK. If Labor and the Greens say the debt limit is $400 billion, I will do what I must, and that is, cut the Budget. Make significant cuts right across the budget to make sure we never get near that debt limit. I will not do what Labor has done. I will not put in place a Budget that has a bigger debt then the debt limit. I will not do that, that is economically irresponsible. It is the way Labor behaved with the Greens. I will not do it, and therefore, the Greens and Labor will be responsible for the very significant cuts that would need to be made to ensure that we have peak debt of $340 billion from the measurement from the Treasury. Plus a $60 billion buffer for financial market purposes.
PRESENTER:
Next month, you will rule on the GrainCorp takeover by a US company. How is that decision going? It's a tough one.
TREASURER:
There are thousands of Foreign Investment Review Board decisions made every year.
PRESENTER:
This one is in the spotlight.
TREASURER:
I am sure there will be others. I have no doubt there will be plenty more over time. My job is to ensure that foreign investment is not contrary to the national interest. It is a powerful test, it weighs heavily. I will do what is right for my country.
PRESENTER:
Do you think it is possible to get to that conclusion of a foreign takeover of GrainCorp with conditions?
TREASURER:
I am not going to speculate.
PRESENTER:
Treasurer thank you so much for joining us on ABC Breakfast.
TREASURER:
That is fine, Fran, thank you very much.