RICHARDSON:
Fresh from an historic deal with the Greens, here he is, Joe Hockey, good evening, Joe.
TREASURER:
Good evening – I do not know how to take that.
RICHARDSON:
Well, is it not true?
JONES:
Joe, I would prefer to introduce you [as] fresh from several scintillating performances at Question Time.
RICHARDSON:
Oh, he’s certainly done that. I think in Question Time there are two stars, that is him and Tony Burke …
JONES:
Oh, Tony Burke. Joe, congratulations an excellent initiative in relation to the abolition of the debt ceiling. It doesn’t matter who you do the deal with as long as you get the right result.
RICHARDSON:
It doesn’t matter who you deal with?
JONES:
You told me off air you believe there should be no debt ceiling, come on.
RICHARDSON:
I am more than happy with the debt ceiling being abolished…
JONES:
Well that’s what Joe’s done
RICHARDSON:
I was in a Cabinet for seven years where there was no debt ceiling, we seemed to manage…
JONES:
Is Joe still there?
RICHARDSON:
Of course he’s still there, I want to ask you about this, why did you rush out and do a deal with the Greens, why didn’t you argue your case through? You never know, the Labor Party might have seen sense, Joe, it’s possible. It’s not likely, but it’s possible.
TREASURER:
We did argue our case through. We offered briefings to Bill Shorten and he refused them and they were Treasury briefing we offered. He refused them. The Labor Party left us in debt exceeding well over $400 billion but they only wanted to have a debt limit of $400 billion. They were kicking the can down the road. Exactly the same problem that we have seen in the United States, which just creates uncertainty. So they leave us with a problem and then they prevent us from delivering a solution. That is not acceptable for good Government.
JONES:
Joe, I think there’s a lot of people watching who don’t quite understand the history of all this. We have never had debt ceilings until we had the architects of debt, namely the Rudd/Gillard Government. They firstly passed legislation wanting a $75 billion debt ceiling. Then when they’d spent all that they jumped it to $200 billion, then they jumped it to $250 billion then they jumped it to $300 billion. Now, because you’re governed by Legislation, you are unable to pay your bills if the debt goes beyond $300 billion. At what point in this month will the debt go beyond $300 billion? Your liability, if in fact this Legislation isn’t passed?
TREASURER:
We will reach the debt limit next week. It is very close at the moment. That is just an irresponsible legacy from Labor. We have only been in Government a short period of time. We are now cleaning up the mess and this is a classic example of just leaving an irresponsible problem to us to have to fix. It is just typical of what we’ve had.
JONES:
The concept derives, doesn’t it, from the United States of America, which is different from us where there is a separation between the Executive and the Legislature. We don’t have that separation. One of the weaknesses, would you agree, of the debt ceiling is that it is almost a confession, by Government, that they can’t control expenditure. You have the machinery to control expenditure, which means you can control debt.
TREASURER:
That is exactly right. The fact is, the Labor Party always treated the debt limit as a debt target. So they would always hit it. What we said was, we should increase to a level that you should never get to, which is $500 billion, given Labor left us with well over $400 billion. We were advised, for market purposes, you wanted to ensure that you would have a buffer of about $40 billion to $60 billion above that which took us to $500 billion. At the end of the day, the Greens were the sensible ones, believe it or not, which has consigned Labor to the fringes of economic debate. The Greens were the sensible ones and said, ‘Look, let’s sit down and work this through’. They have come up with proposals that improve transparency in relation to the treatment of debt in the Budget and we welcome that.
JONES:
I understand in terms of transparency, you are going to have to report to the Parliament, each time the debt goes beyond $50 billion.
TREASURER:
Correct, we are fine with that. No problems. We are going to explain what debt is used for every day expenses and what debt is used for infrastructure. We are very happy with that. We are dealing with the legacy that we have got. There is a lot of work to do in this regard.
RICHARDSON:
Joe, I’m delighted that you and Christine Milne and Adam Bandt are all mates now, I think that’s terrific…
TREASURER:
Richo, you were the pioneer. You are the pioneer.
JONES:
The tree hugger from Atherton remember?
RICHARDSON:
Well, I tell you what [inaudible]
JONES:
You did it in order to get the Green preferences.
RICHARDSON:
It had nothing to do with getting the Green preferences, I did it because it was right.
TREASURER:
[Inaudible]
RICHARDSON:
That was 26 years ago, I think the world has moved on.
TREASURER:
You are in great shape for your age, Richo.
RICHARDSON:
Thank you very much, I don’t feel it. Joe, what was the ERC like on Sunday night, not ERC but that meeting that Paul Kelly described today in The Australian with Tony Abbott and Christopher Pyne.
JONES:
Another fiction.
RICHARDSON:
The meeting occurred, no one is denying the meeting. What do you think about that? Are you happy with the outcome on Gonski?
TREASURER:
Again, this is fixing up one of Labor’s messes. I think I heard Alan saying a little bit earlier, there are six versions of Gonski.
JONES:
Correct.
TREASURER:
The fact of the matter is, Labor, on the eve of the election, decided not to give any money to Queensland, Western Australia or the Northern Territory.
JONES:
Those who didn’t sign up.
TREASURER:
It was meant to be a national scheme, a single national scheme. But Labor, in its desperation, went and negotiated a separate deal whenever they could. they had no conditions on some of those deals they signed up. The net result was there was no national scheme, every state had a different agreement and clearly there was a massive difference between what they were doing for one part of the country versus what they were doing for another part of the country. We have recognised the problem, we stepped up to the plate, we are fixing the problem.
RICHARDSON:
Look, I’m proud of you – you’re stepping up to the plate. But it took a while to step up. First off you said you funded for four years then ten days ago you announced you were going to fund it for one year. Then you get into all manner of strife over the course of the next week and Sunday night you all get together and say, ‘woops, this is a bit of a problem’, now we’ve got to change – and you did change.
JONES:
Now but Richo…
RICHARDSON:
Did woops not happen?
JONES:
…I know I’m right. In the forward estimates, under Gonski, there was $2.8 billion for four years. Not $16 billion, $2.1 billion of that is money already committed to other programs. All that Gillard did under Gonski was provide an extra $700 million. It’s a myth that they were going to be the big servants of increased spending for education.
RICHARDSON:
The big spending was the next two and you know it. You’ve got to include that in the introduction.
JONES:
Could I just ask you this, even though it is not your portfolio, is it the very big issue facing the parents that you’re broadcasting to now, as to what we’re doing with this money? We have to address, don’t we, what is being taught, what is not being taught, and what is badly taught? That is the crisis and we have seen those international figures today indicating we have gone even further backwards in reading, maths and english and literacy by international standards.
TREASURER:
You are right, the fact is that under Labor expenditure increased by 10% on schools, but as we have just heard today, educational standards have dropped dramatically between 2009 and 2012. It is not money, it is about performance, it is about teacher standards, it is about outcomes. I have three very young children, two of them are at the local public school. What I want as a parent is to know that they are interacting with their teachers. The teachers are fully across the curriculum and that there is opportunity to engage and have a better education than anything that I might have got or any generation before me got. It comes back to those standards that really matters. That is what we are focussed on.
RICHARDSON:
When you say that you are focussed on the standards, it seems to me, why didn’t somebody, at some stage, do something about the payment of teachers? I think it is an incredibly important profession. Yet if I am a senior maths teacher or science teacher in a secondary school, I’m teaching year 12 kids, I’m getting $70 000 or $80 000. It’s just not something to which people will aspire. Don’t we want more and better people doing it?
JONES:
The NSW Government made a deal yesterday with teachers …
RICHARDSON:
2.5%.
JONES:
… to address that very issue. Now, at the end of nine years they will be on $45 000 more than they are today and there will be teachers now who will be rewarded for excellence on salaries over $100, 000. But you know, there is a quid pro quo isn’t there, Joe? You say, ‘well we’ll whack up the salaries,’ but you have got to prove to us that the educational outcomes are internationally competitive and they’re not.
TREASURER:
Exactly right. This is about performance, it is about outcomes. At the moment, the outcomes are just not good enough. This is something Christopher Pyne is very focussed on.
JONES:
Joe, could I just ask you this question. The Grattan Institute have said that you’re going to have to do something about $37 billion in expenditure if you’re going to turn the finances of the nation around. Now there does come a time, doesn’t it, when the honeymoon in a sense is over, we have got to forget that Labor made a mess, we’ve inherited the mess, we know all that stuff. Where are you going to be able to knock off that expenditure to turn the whole Budget position around? I mean, you’ve got $90 billion being spent by State and Commonwealth on Health. You’ve got $42 billion a year being spent on primary and secondary education. They’re massive amounts of money. When do you start to tell the electorate the bad news, that there is going to be some pain down the track?
TREASURER:
The first task is to identify how significant the problem is. When I release the half-yearly Budget update in the not too distant future - certainly before Christmas - you will see the full scale of what we inherited. We have started a Commission of Audit that is looking at every area of federal government expenditure. That will be reporting back to us early next year. That will form the basis of a lot of our announcements in the Budget, which I will deliver in May of next year. This year’s Budget update is about identifying the scale of the problem. Next year’s Budget is about rolling out the plan to fix the problem.
RICHARDSON:
We have to go to a break, Alan and Joe, we are back in just the second. But while we are doing that Joe think about this. According to the Kelly article today it was the ERC saying we have got to get some savings out of education, out of Gonski. Of course, that did not work. Is that can be the case across the board? Just where do the big savings come from? … Welcome back to Richo and Jones, Joe, last week I interviewed Chris Richardson , who I always find to be a really interesting man because he can explain very complex economic problems rather easily. What he said about you and Tony Abbott at the moment is that what concerns him is you are not laying the ground for big cuts, for getting back to surplus very early. What do you say to that?
TREASURER:
He is entitled to his opinion. Every economist I know seems to have many different opinions. Chris Richardson, you are right, is very well respected. The fact of the matter is we have got to identify what the scale of the problem is first. We are going through every aspect of the government and we just keep uncovering all these problems that have been buried deep in the Public Service. We will reveal all of those before Christmas. That will give us the scale of the challenge. We have also been waiting for the latest update on the economy from the Australian Bureau of Statistics, which was released today. The September National Accounts – which show that we have inherited from Labor an economy that is certainly stuck in second gear, and unemployment rate that continues to rise, falling terms of trade and a deteriorating Budget. The first thing that you have got to do is identify how big the problem is, where the problem is, and then you start laying out your plan to fix it.
JONES:
Joe, is not one of the metaphors of the problem, the fact that whenever there are tax changes announced by a Government those changes have to become effective immediately after the announcement is made, otherwise people adjust their behaviour to avoid the tax? You then legislate afterwards. Is it true that when you came into Government you found that there were almost 100 tax change announcements made by the previous Government, which had not been enacted by legislation? And can I ask you, does that mean people have been paying tax when they were not required by the law to pay it? And will you have to rebate some of that tax to those taxpayers?
TREASURER:
There will be some people that did that, exactly right. Some of the announcements – date back to 2001. When I spoke with Treasury officials about those announcements – that were made by previous Treasurers but were never legislate – many of them could not remember who did it, the circumstances in which the announcement was made. They did not know how to legislate it because no one was around at the time of the announcement. Yet it is still law. Some people complied with the law and some did not. It is bizarre. It just adds to the regulatory burden and red tape burden that businesses have to deal with. What we said was enough is enough. We are going to draw a line in the sand. We are going to deal with every one of those announced, but unlegislated tax changes. Either they are in or they are out. We would prefer them to be out and will be announcing that in the next week or so.
JONES:
That in relation to something like, for example, the renewable energy targets. You are talking about being short of money. These things are acquiring massive subsidies via renewable energy certificates, wind power for example, that has got no way of ever servicing the energy needs of Australia. Subsidies for solar power. When will you be complete or have the renewable energy target review complete so that we will know whether what I regard as that palpable waste in terms of massive subsidies to these things is going to continue or discontinue?
TREASURER:
From memory, and do not hold me to this exact date, I thought it was 2014 or 2015. There is a scheduled review of the RET program we are going to keep to that. Obviously, it is an area where there is a massive amount of subsidy. Every time I drive down to Canberra from Sydney on Sunday, and I must say, few things aggravate me as much a seeing all those windfarms around Lake George, which I find an enormous eyesore.
JONES:
All subsidised.
TREASURER:
That is going to be dealt with in the review. I am not going to make up policy on the run, it is important to consider it in a proper context, but it is certainly something that is due for review.
RICHARDSON:
Can I ask you, though, are you ever going to consider – and I know you politically have to say no, but somewhere in the back of your mind if we are in all this strife – you must have a target for when we’re back into surplus? You must have. I know you have been scrupulously avoiding telling us. But do not you think at some stage, you have got to share that with us? When you think Australia can get back to surplus?
TREASURER:
The best way to get back to surplus is to spend taxpayers money wisely, get rid of the waste, start focusing on building productive infrastructure which is going to help grow the economy rather than sending out cheques. We are working overtime to stop the $900 cheques continuing to go out from the Labor stimulus back in 2008 – 2009. The cheques have still being going out and we are trying to find all the legal justifications to stop the cheques still going out in 2013 potentially 2014. We are doing everything we can to stop the waste, but it is not something that happens overnight. That is why I cannot give you a timetable but what I am focused on is growing the economy. Because the only way we are going to pay down this mountain of debt is to have a strong economy with more people in jobs. Hopefully they will be paying tax, because they will be in jobs and if they are paying tax and they are employed than it means the Budget will improve quicker.
JONES:
Businesses, listening to you now, Joe, would agree with you but then they would say, ‘Well, Joe, you cannot grow the economy unless there are significant industrial relations changes’. There are small shops and small traders, bookshops, cafes, who on public holidays do not open because of the exorbitant costs via penalty rates and all the rest of it. I know you made an election commitment that you would not do anything about this, but surely, the review of the industrial relations structure is urgent.
TREASURER:
We have said that we will have a review that we will then take to the next election of the industrial relations system. Even the ones that we took the last election, such as the reintroduction of the Australian Building and Construction Commission, which is a watchdog in the building industry that is so essential for meeting the challenges at the moment. The Labor Party and the Greens have indicated that they are going to block it in the Senate. They are blocking everything in the Senate at the moment and the only thing that has come through is the agreement I have been able to come to with the Greens in relation to debt. They are blocking us on tens of billions of dollars of improvements to the Budget. They are blocking us on getting rid of the carbon tax, which will help to grow the economy. They are blocking us on getting rid of the mining tax, which not only will save $13 billion from the Budget, but will actually give mining investment a bit of a surge. They are blocking us on even some of the things they took to the last election. It is the most absurd thing I have seen in politics in 17 years. Labor is not only trying to block us from implementing our policies, they are trying to block us from implementing their policies in relation to education savings to pay the Gonski. It is a bizarro world in the Labor Party caucus at the moment but we are trying to push through.
RICHARDSON:
I am not going to argue with you about that, there are plenty of things I would like to argue about, but I want to thank you to your time, Joe. I know it’s hard to give up dinner and come here. Mind you, after operation you probably don’t have to eat as much. But I want to thank you very much, honestly Joe…
TREASURER:
You are a smooth talker. Richo.
RICHARDSON:
Will see you in the New Year, OK?
JONES:
Joe thank you and congratulations on some splendid performances in the last couple of weeks.
TREASURER:
Thanks very much.