Thursday, July 02, 2009
Let's not tar and feather him for it
Bernard Keane in Crikey:
Hockey showed substance and maturity and got kicked for it
We always lament politicians’ lack of candour and preference for staying on-message, rather than treating us like intelligent people. And the problem is undoubtedly getting worse with Kevin Rudd, a thoughtful and engaging interlocutor off-the-record, who has taken rigid public messaging to heights hitherto never seen.
So spare a thought for Joe Hockey, who on Tuesday spoke intelligently and candidly and has copped a bagging for his troubles.
I’ve regularly been calling Hockey a lightweight but his performance at the CEDA lunch earlier this week showed substance and maturity....
Hockey got considerable attention with his suggestion that the Government should try supporting residential and commercial property borrowing through extending the government guarantee to mortgage-backed securities, rather than directly pumping liquidity into the relevant markets through its $8b funding for residential mortgage-backed securities or the Ruddbank proposal. This is a shift for the Coalition, which has been sniping away at the bank guarantee virtually since the Government announced it in the middle of the financial crisis last year, but welcome nonetheless (see Christopher Joye’s excellent discussion at his Business Spectator blog).
So far, so good.
When it came to the Q&A session, though, Hockey went for candour rather than the usual platitudes, admitting that the criticism that the Howard Government had spent too much on middle class welfare was “reasonable”. I put a similar question to him after his Budget Reply speech a couple of weeks ago and his response was to note that there weren’t too many people at the time urging bigger surpluses. He was still referring to “hindsight heroes” on Tuesday but it marked the first time someone from the Howard era other than the possibly slightly biased Peter Costello was prepared to acknowledge some fiscal indiscipline.
In doing so, Hockey promptly earned the front-pager “Hockey creates more turmoil for Turnbull” at The Oz, although his admission that there might have been an arguable case for ditching the tax cuts that kicked in from yesterday also caused angst. Hockey is still entangled in that issue in the Fin Review today, after trying to clarify himself.
Just to rub it in, Wayne Swan materialised from the Utegate-induced exile to call Hockey “sloppy” – his favourite and now rather well-worn joke about his opposite number – and describe his remarks as “extraordinary”.
In fact his remarks were anything but sloppy.
Hockey won’t get too much argument from any economists about the level of middle class welfare during the Howard era, and he probably won’t get too much on the tax cuts either, which a lot of economists regard as misdirected and the last thing we need given the long haul it will take to return us to surplus (some of us think they were needed to maintain political credibility, but that’s another matter).
Hockey did do something extraordinary, though. In preparing his speech, his staff misread a graph on the size of automatic stabilisers in the Bank of International Settlements’s Annual Report – it’s on page 112 if anyone cares to look – to make a point about how the Government didn’t need such a big stimulus package. When the error was pointed out, he copped to it.
Can you imagine Wayne Swan or Kevin Rudd readily owning up to a simple error like that? It took the Prime Minister several thousand words to eventually own up that he’d got an unemployment number wrong in Parliament last year.
What Hockey did was to break the supposedly golden rule that the Liberals must not under any circumstances allow the record of the Howard Government for competent economic management to be besmirched, lest they go the way of Kim Beazley’s Labor, which lost ownership of the economic reform mantle of the Hawke-Keating years.
The problem with this rule – important as it is to any party aspiring to lead the country during a prolonged economic downturn – is that it makes it hard for Hockey to look sensible or participate effectively in economic debates. The Howard Government started off very well as economic managers and, like the Labor Government before it, went downhill. There are creditable aspects of its record that should be defended – the early fiscal discipline, the introduction of a mostly-intact GST, the first wave of IR changes, the Future Fund – just as there are other, disastrous aspects of its record that cannot be defended.
By acknowledging that more complex reality rather than engaging in reflexive lauding of everything that occurred until November 2007, Hockey looks far more credible as a shadow Treasurer. He won’t get any credit from the mainstream media or his political foes if he does, but he should stick with it.
THE HON JOE HOCKEY MP
EXCERPT FROM PANEL DISCUSSION AT THE
COMMITTEE FOR ECONOMIC DEVELOPMENT OF AUSTRALIA
Lucky you dropped that strategy after the 1998 election.
Well I seem to recall a lot of people saying it was outrageous that the Government was
holding their taxes and they wanted their taxes back.
Quite seriously though, was it a mistake to have seven consecutive years of cuts to personal
income tax and one more under this Government? Were the tax cuts that you put in place a
step too far?
No. Because you’ve got to provide people with an incentive to work hard. The fact of the
matter is that I think there is something unjust about people spending the first six months of
the year working for the Government, rather than for themselves.
You mentioned the automatic stabilisers, one of the criticisms that’s greatest about the
Howard Government is that you actually didn’t let the automatic stabilisers work on the other
side. That is, build up revenue when we had the boom times, one per cent of GDP was
Look I think that’s a reasonable criticism. I mean the Family Tax Benefit that we had was
very generous and what we did was we churned it through the payments system rather than
putting it into the tax system (tax cuts) and that’s because we wanted to target families
because families were facing the greatest cost burden; the price of residential real estate was,
you know, rising significantly and as we all know in Sydney basically you needed to have a
two-income household to pay a mortgage.
Now we looked at that and we said well, how can we help those people and still give some
people some level of choice about staying at home, mothers staying at home and that’s why
we had the Family Tax Benefit which was very generous.
Now some people call that middle-class welfare but I seem to recall everyone crying out for
more childcare, tax deductible childcare - you remember that debate? Everyone remembers
that. There's been a whole range of those debates. And they were outraged when we had
surpluses of $20 billion. So you know there's a lot of hindsight heroes around at the moment.
Alright, in hindsight, if you had your time over again you would have had bigger budget
surpluses going into this downturn?
If we had our time again I would better explain the Future Fund and I would have set up the
other funds earlier; the Higher Education Funds for infrastructure and the Health and Hospital
Well let me ask you this. Wayne Swan implemented the personal income tax cuts that we…
You know what Stephen? Isn’t it interesting, it’s one thing for the Treasurer not to mention
the budget deficit on Budget night, but to forget to mention $18 billion of tax cuts, think
about it; why wouldn’t the Treasurer of Australia delivering $18 billion of tax cuts mention it
in the Budget speech?
Should they have gone ahead?
Well, that's a good question. (Pause) I'm just saying it's a good question.
Can you give me a good answer?
Look the honest answer is there would have been a legitimate justification for the
Government to say our debt, you know, our recovery, our economic recovery will be slower
if we are running a big deficit and I think it should have been considered as part of the mix.
Having said that, and I want to make this, emphasise this, the Liberal Party believes in lower
taxes and you know it would have been incredibly hard for us to support the removal of the
income tax reductions.
Well the report from the Bank for International Settlements released overnight confirms that what the Coalition has been saying about debt and deficit rings true. There is growing alarm around the world about Government debt and the debt being accrued by Kevin Rudd and Wayne Swan is going to push up interest rates in Australia. It is going to have an impact on our economic recovery and the Bank for International Settlements (BIS) overnight identified this as a real issue facing Australia and the world.
You cannot solve the world’s economic problems, which were caused by too much debt, by borrowing too much money. The world got into its economic problems by borrowing too much money, there are governments around the world that think they can solve the world’s economic problems by borrowing too much money.
That’s just dead wrong. It is wrong for Governments to needlessly borrow money. The Australian Government is running seven years of deficits for only three years of below trend economic growth, and the real impact will be that the interest that has to be paid by Australians from the Budget will outstrip Agriculture, Forestry and Fishing and a range of other portfolio areas. It effectively is a ball and chain around the leg of so many Australians.
This is further proof that the Government’s debt and deficit strategy is not in the best interests of Australia.
This is just one report though. There have been numerous others saying, you know, that stimulus measures are necessary given the financial crisis. How do you balance that?
Well we have always supported targeted stimulus measures. There is two things that the report identified; firstly that Australia has the third most aggressive automatic stabilisers in the world after the USA and Korea, meaning we’ve got a very generous welfare system and also the fact that company tax has dropped dramatically. But the second key factor is that Australia’s easing of monetary policy and the reduction in the cash rate is second only to New Zealand. It’s second only to New Zealand in its aggressiveness. And the fact of the matter is that with very aggressive easing of monetary policy in Australia and the automatic stabilisers, the Rudd Government has just spent too much money. And the $900 cheques, whilst being a ‘sugar-hit’ to the Australian economy – a limited sugar-hit in that – the fact of the matter is the longer-term negative impact is going to be substantial and it’s going to reduce our economic growth and our recovery.
Just on another matter, what did you think about the polls?
Look, polls are going to go up and they’re going to go down and I don’t think you can live and die by opinion polls, you have to live and die by good public policy and that’s what we are focused on.
Any desire to be Leader?
I’m not engaging in any more speculation. I think there has been plenty of that. We’ve got to get on with life.
Is it time for an Opposition reshuffle?
That’s up to the Leader. I’m not going to add to that speculation. There’s plenty of opinion about those things, I’m not going to add mine.
Do you agree that… the Federal Government’s considering the possibility of taking over the hospital system, is that something the Opposition would support?
Well Kevin Rudd said that he would fix the hospitals by the middle of 2009 or take them over, have a referendum to take them over. Now Kevin Rudd’s got to keep his promise. No one believes that the hospitals in Australia have been fixed, so now’s time to put up Mr Rudd – you’ve got to deliver on your election promise. You said you want to take over the hospitals, now’s the time to do it because you said that if they’re not fixed by the middle of 2009, the buck stops with Kevin Rudd. And we’re happy to see the buck stop with Kevin Rudd. I mean Kevin Rudd knows how to spend a buck, now the buck stops with him and he’s got to explain to the Australian people why he hasn’t fixed the hospitals by the middle of 2009.
Would the Opposition support that idea?
Well we will see what he proposes.
Well if it’s a proposal to takeover…
Well we will see what he proposes. I’d be very interested to see how Kevin Rudd can solve the hospital crisis without spending even more money, and I’ll tell you what it will come home to roost. Handing out cheques for $900 instead of buying new equipment in hospitals says everything about the priorities of the Rudd Government.
If there was a referendum on the issue…
Let’s see what the referendum says. I don’t think it’s going to be as simple as you might suggest.
You said the government borrowing is potentially going to push up interest rates, it’s been a consistent thing you’ve been saying. Do you think overseas borrowing by the US, Britain and other much larger countries will actually have a much larger effect than anything Australia does?
Well of course, because their borrowings are very substantial but look, if you’re an alcoholic and there are alcoholics out there that consume more alcohol, then it doesn’t mean you haven’t got a problem, and Australia has a growing debt problem. Just because there are other countries that have an even larger debt problem doesn’t mean, somehow, that the Government’s strategy is right.
But would you agree that that is actually putting greater pressure on interest rates than anything the Australian Government does?
Well I would say to the Australian Government, don’t make it worse by borrowing money and too much money at that.