MICHAEL ROWLAND:
Joe Hockey joins us now from Sydney. Treasurer, good morning.
TREASURER:
Good morning, Michael.
MICHAEL ROWLAND:
We saw most of the overseas markets up overnight, a bit of a see-saw on Wall Street, it was up strongly earlier in the day, the ASX bounced back yesterday, are you feeling some relief this morning?
TREASURER:
Well no, as I said yesterday, and the day before, and as I say today, you have to look at the fundamentals of the markets. The Australian economy is performing well, it can do better, but it’s performing well. The United States economy is performing relatively strongly, Europe's back, Japan is back, and the fundamentals in China are gradually improving from the information that we’ve received, for example, the Chinese property market is showing signs of recovery. The actions by the PBOC overnight to cut interest rates and relax capital controls in China is another positive step to help the Chinese economy.
MICHAEL ROWLAND:
You will be using your speech today at this national economic reform summit factoring all those challenges facing Australia and the globe, to make the point that consumers are the really important ones in the equation in Australia and governments should listen to them. What do you mean by that?
TREASURER:
Well, we have seen rapid change in the world in the last few years as a result of emerging technologies. Mobile phones now aren’t just immediate communications devices. You can set up a small business on a mobile phone, you can access finance and purchase goods anywhere in the world. Because of the disruptive technologies in our society, consumers are more empowered than ever before. Consumers are sovereign and therefore it's the consumers that are forcing reform, not a bunch of politicians necessarily standing on a soapbox in Canberra telling people what they should have. Because consumers are changing the nature of business, from the taxi industry using Uber, through to journalism by using Facebook, through to online gaming, which is a threat to casinos and so on. Every area of life consumers are changing the behaviour of society more so than ever. Now governments have a role to facilitate that change, not to try to impede that change, and therefore you shouldn't simply assume that the only reform agenda can only come from the lips of a government.
MICHAEL ROWLAND:
But surely many people watching this will say hang on a moment, aren't governments meant to lead change, not simply facilitate it?
TREASURER:
Well, it's both. In some areas you do need to lead change and that's exactly what we're doing in relation to taxation reform, going through a proper process, a methodical process in relation to taxation reform. That's why the Prime Minister and the Premiers are doing in relation to Federation reform. We've had a methodical process in dealing with the Financial System Inquiry, David Murray's inquiry, which I will be responding to in the next few weeks. The Harper Review into competition policy, so you have those processes. But, at the same time, we need to recognise that consumers are sovereign in modern society and that's a good thing, that's a good thing. And the worst thing you can do is start to hold them back with new, unexpected taxes or new, unexpected regulation.
MICHAEL ROWLAND:
On the morning of this summit, your former Treasury Secretary, Martin Parkinson, has a piece in the Financial Review where he bemoans the lack of political leadership in Australia and quoting directly he says the repetition of slogans is not a substitute for policy action. Does he have a point there?
TREASURER:
Well, Martin Parkinson, who I have a high regard for, has always been consistent in his argument for reform and he's quite right. Look, reform, when you talk about it from a political perspective, is organised change. It's organised change. It’s deliberate change. And you've got to manage reform carefully. In some areas, reform will move much faster than the political class, for example, in technology and in mobile communications and so on. In other areas, the political class has to respond to the need to reform, such as the demographic changes in Australia having an impact on the health system and on the aged care and welfare system. In other areas, you've got to be very careful about reform, such as in national defence and national security. It needs to be very carefully calibrated to continue to deliver the outcome. And that's what it comes down to. Australians, you can have all the discussions you want about process, and you can have all the discussions you want about ideology, what matters most to every day Australians is what is the outcome? How is it going to affect me? Am I going to be better off? That's a legitimate question, so every bit of reform has to have a purpose and we've got to explain that, collectively, to the Australian people.
MICHAEL ROWLAND:
But the criticism is there has been too much talking, too much explaining, not enough action. There have been criticisms of your speech on Monday, where you talked about the problem faced by many people being pushed into higher tax brackets, this thing called bracket creep. Many arguing if you're so concerned why don't you index the tax brackets to inflation, that would solve that problem?
TREASURER:
Well, that's a perfectly good suggestion. We've received 850 submissions in relation to tax reform…
MICHAEL ROWLAND:
Well, if it's a good suggestion, why not do it?
TREASURER:
But this is exactly the point, Michael. Last Monday, I go out and point out the problem that needs to be addressed and the medium-term threat to the Australian economy, everyone says oh, great, that's the problem, what’s the solution? Well, actually you need to explain why you are undertaking reform. You actually need to take the community with you and explain why it is necessary, and on Monday I explained that we need to have personal income tax cuts into the future because if we are going to grow the Australian economy and create more jobs, we can't take away the incentive for people to earn more money, to have a go and that is the point. The impatience of a number of commentators, the impatience of a number of critics is holding back reform because the starting point has to be, you have to explain the problem, and then explain what the solution is, and then lay down a plan to deliver the outcome.
MICHAEL ROWLAND:
You've explained how you want to ideally achieve personal income tax, possibly as early as the next election and still get the budget back into surplus by 2020. You've explained that a lot and not just this week. But still many people don't know exactly, Joe Hockey, how you can achieve both aims?
TREASURER:
Well, we are, as I said, in discussions with the states about whole scale tax reform. Now, last Budget I delivered $5 billion of tax cuts for small business. People said it wasn't possible to do, you wouldn't be able to pay for it. Well we did, we did. That $5 billion of tax cuts to small business have had a positive impact on the Australian economy. There's no argument about that. So if you are measured, focused, methodical in the way you do things, if you save money where you can and certainly don't go on massive new spending binges in a range of different areas, then you can find the money to pay for the necessary reform to strengthen the Australian economy, including tax reform.
MICHAEL ROWLAND:
Just a couple of quick issues before you go, Joe Hockey. Fairfax this morning is reporting the Abbott Government actually approached Washington to ask the Obama Administration to formally ask Australia to join the air strikes in Syria. As a member of the National Security Committee, was that the case?
TREASURER:
No, the Prime Minister was asked by the President of the United States in a formal request. Now I'm sure they've had many discussions about the issue from time to time, but the fundamental point is the United States made the request to us and we are considering that request.
MICHAEL ROWLAND:
But at any time did the Prime Minister say in those early discussions to the Administration or to the President, gee, it might be a good idea to actually formally ask us, we'd be willing to jump in?
TREASURER:
No, I wouldn't speculate on that and I see in the same story that makes that suggestion, it was denied by government officials.
MICHAEL ROWLAND:
Now finally, your former Breakfast TV sparring partner, Kevin Rudd, as you probably know, is going to hit the global airwaves on the weekend guest hosting a CNN program which has an audience of I think about 300 million people, how do you reckon he will go?
TREASURER:
Well, I don't know. I'm waiting for the phone call from Kevin.
TREASURER:
You would be a willing interviewee, would you?
MICHAEL ROWLAND:
I'm always happy to help Kevin Rudd in one form or another. Now that he's not in the Labor Party anymore or now that he's not in Australian politics. I see him from time to time and, you know, I still have a regard for him, a good regard for him.
MICHAEL ROWLAND:
You will have to tune in to CNN on the weekend. Joe Hockey, thanks for your time.
TREASURER:
Can't wait.
MICHAEL ROWLAND:
I'm sure you can't. Thanks for your time this morning.