Bishopwatch: She's reaching new heights (or plumbing new depths)

I reproduce without further comment the transcript of this morning's Sky News Agenda interview:

Sky News, Sunday Agenda

Julie Bishop, Deputy Opposition Leader and Shadow Foreign Affairs Minister

23 August 2009

Helen Dalley: What exactly was bungled about the visa given to Rebiya Kadeer? You said on Thursday that the visa was bungled.

Julie Bishop: I did not say the visa was bungled. I’m talking about the handling of the whole issue. Ms Kadeer has been here before . . .

Helen Dalley: Excuse me, I’ll just read you the quote. You said “the bungling of the handling of the visa to the Uighar leader”.

Julie Bishop: Exactly.

Helen Dalley: So, what exactly was bungled?

Julie Bishop: This has never been about the issuing of a visa. Ms Kadeer has received a visa in the past and there was no controversy, but this time because of the government’s mismanagement of this relationship the issuing of the visa became a controversy. It did not need to be. It should have been handled in a way as it was previously. Now 18 months ago the Rudd Government was able to deal with the issue of Ms Kadeer and the visa in a way that didn’t cause controversy, but this time relationships had so soured that Mr Rudd was not able to deal with the issue of a visa without it causing a great controversy. Now, Mr Rudd must take responsibility for that.

Helen Dalley: But are you saying that the government should have changed its position on the visa and not allowed it?

Julie Bishop: This is not about the Opposition’s position on the visa because we have never criticised it. We didn’t criticise it 18 months ago, we didn’t criticise it now. This is about the fact that 18 months ago this visa was issued without controversy, and then because of the deterioration of the relationship between Mr Rudd and the Chinese Government it became a controversy. Now, Mr Rudd must take responsibility for this.

Helen Dalley: But how can he if you’re saying that the visa was issued 18 months ago, the same visa was also issued now, why should he change the policy from what you’re saying he should have?

Julie Bishop: I am talking about his handling of the whole relationship. As many commentators have stated it’s the culmination of a series of mishandling . . .

Helen Dalley: Sorry, you are basing it on the handling of the visa.

Julie Bishop: . . . about the whole relationship. And so we’ve not criticised the issuing of the visa then, we’re not criticising it now, but we’re saying the whole mishandling of the relationship with China is such that now everything becomes a controversy and Mr Rudd should start focusing on repairing the damage that he has done to this relationship and not trying to deflect it away onto the Opposition. It is far too simplistic for Mr Rudd to try and say this is all about the issue of a visa to Ms Kadeer. There is a whole raft of issues that have gone on between the Rudd Government and the Chinese Government that have led to this deterioration in the relationships. Now, we were able to manage a very mature relationship with China based on mutual respect. We had common interests but we had different values and we understood each other and were able to deal in that way. But under Mr Rudd you have to ask yourself this key question, has the relationship with China improved under Mr Rudd? It’s patently clear that it has not and he needs to repair it and repair it swiftly.

Helen Dalley: Julie Bishop, I just go back to the earlier comment and question about your going hot and cold, your side of politics on this. I mean former Immigration Minister, Philip Ruddock, said this week that granting Ms Kadeer a visa was a mistake. Then current Senator, Barnaby Joyce, agreed with the government that it wasn’t a mistake to grant a visa. Do you think Australia . . .

Julie Bishop: Mr Ruddock did not say that.

Helen Dalley: Pardon?

Julie Bishop: Mr Ruddock did not say that. He clarified that position. He said that it was a mistake in the circumstances of the whole handling of the relationship . . .

Helen Dalley: I’m sorry I have the quote in front of me. He said, yes, it was a mistake.

Julie Bishop: I spoke to Mr Philip Ruddock, he said the whole handling of the relationship has been a mistake. No one in the Coalition criticised the issue of the visa, the first time nor the second time. What we criticised, and we will continue to criticise until Mr Rudd rectifies it, is his handling of this relationship. He is sending a confused message to China.

Helen Dalley: All right. You have said that several times. Can I just ask you about your position?

Julie Bishop: And no wonder the Chinese are confused because Mr Rudd has not had a consistent position on China. On the one hand he’s trying to be China’s ambassador overseas; on the other side he needlessly offends them over a whole range of issues. It’s not about one visa and it never has been.

Helen Dalley: It’s also the case, isn’t it, that the Coalition was against the Chinalco deal with Rio. That wasn’t necessarily the government’s position. So when the China Daily talks about the “anti-China chorus” from Canberra and Australian politicians being “sinophobic” they could be talking about you and Malcolm Turnbull, couldn’t they?

Julie Bishop: The Chinese Government is concerned about the government in power. They don’t even have an opposition in China. They are concerned about the government that makes the decisions of the day. And this was another example where the government did not make clear to China the arrangements with the Foreign Investment Review Board. It’s quite clear that the government was sitting on that decision hoping that events would overtake it as events eventually did. But again that sends such a mixed and confused message to China. Why didn’t they tell China that there was a foreign investment review board process that could take some time and could in fact end up with a recommendation not to proceed and it wasn’t just a rubber stamp. But the government wanted to wait and that sent a confused message to China.

Helen Dalley: Ms Bishop, if I could interrupt you please, do you agree that in fact Kevin Rudd’s Government did not cause the problem that arose when Rio reneged on the Chinalco deal. It had nothing to do with the Foreign Investment Review Board in the end. The government had nothing to do with that and that peeved the Chinese when Rio pulled out.

Julie Bishop: Well I’ve never said that the government caused the Chinalco problem, I’ve never said that.

Helen Dalley: But you are saying he’s caused all these problems with China, he has to take responsibility for.

Julie Bishop: I’m talking about the confused messages that the government is sending. And the key issue is: is our relationship with China better now than it was when Mr Rudd came to office and patently the answer is no it is not.

Helen Dalley: Well on many scores in fact some would say that now it is better because in fact right when you are saying this week that the relationship is at a crisis point the big Gorgan LNG deal came about. And even Rio and BHP are saying it was still very much business as usual with iron ore sales to China, which have actually increased in the past few months despite the Stern Hu debacle.

Julie Bishop: Absolutely. There is a complete difference between the political relationship between the Rudd Government and the Chinese Government and the commercial relationships between big companies in Australia and in China. Now, the Gorgon deal is a magnificent deal for Australia. It’s been in the making for some number of years. In fact the development of Gorgan has been underway for decades. And a contract was signed between ExxonMobil and PetroChina for $50 billion. That is a fantastic outcome for Australia, for Western Australia. And so the commercial relations can go on. The political relationship between the Rudd Government and the Chinese Government is in disrepair as evidenced by the fact that Chinese officials are cancelling meetings. And as I said the most humiliating blow for Mr Rudd is that China has withdrawn cooperation from Mr Rudd’s much touted Asia Pacific Community proposal. Now, without China’s backing that is unlikely to proceed.

Helen Dalley: All right. Can I move on? Should Kevin Rudd meet the Dalai Lama on his visit here later in the year?

Julie Bishop: I would hope he would. Prime Minister Howard met the Dalai Lama when he came here. He is the spiritual leader in Tibet and I would hope that Mr Rudd would meet him.

Helen Dalley: All right. Let’s turn very quickly to Afghanistan and there have been reports of some violence during the elections. But I want to ask you about reports that the top US Commander in Afghanistan, General McCrystal, wants our troops to be allowed to be deployed outside the current zones. Should Australia agree to the general’s request?

Julie Bishop: Well, I’m not sure that General McCrystal has actually made that request at this stage and obviously we would hope that the Australian Government would consider it. Our troops are making a fantastic contribution to the outcome in Afghanistan, not only in a military sense but also in a civilian sense, and the recent elections show, not withstanding the violence and the intimidation, that an election could be held and it is a step forward in democracy. And we certainly support the brave and courageous Afghani people who went out to vote in the face of the Taliban violence. But in terms of whether Australia should expand its commitment we would obviously have to consider what the request is and why Australia would be required to do that.

Helen Dalley: He didn’t appear to be . . .

Julie Bishop: But we most certainly . . .

Helen Dalley: Go on.

Julie Bishop: We most certainly give support to the Rudd Government in its commitment to Afghanistan. I made a speech in the House of Representatives last week speaking about the role that Australia is playing as part of the international forces. We need to ensure that Afghanistan doesn’t again become a headquarters for terrorism and we will need to stay the course. It is going to be a long hard road and Australia needs to remain committed. Now, the level of that commitment will depend on our capacity and the international community’s capacity as well.

Helen Dalley: Just an issue that’s come up again that’s been raised before, but this morning there are reports, and it’s more destabilising for the Liberals, with reports that Malcolm Turnbull actually lobbied various ALP figures very hard a decade ago to join them, including lobbying Bob Hawke.

Julie Bishop: Come on, Helen, the Labor Party’s going to have to make up their mind about Malcolm. On the one minute he’s this neo-Liberal capital extremist, and now on the other hand they’re trying to get us to believe that he’s a closet socialist. I mean this is an old Labor Party tactic. They tried it the other week in Western Australia when there was a person nominated as a potential Liberal candidate and they rolled out all the Labor heavies to say that this man had actually tried to join the Labor Party. It’s a familiar tactic. I have known Malcolm Turnbull for 20 years. . . .

Helen Dalley: But Julie Bishop, we have already known that Malcolm said there were you know casual talks. This is now saying that he actually lobbied. Are you saying he did not lobby to join the ALP?

Julie Bishop: I have known Malcolm Turnbull for 20 years. He has always been a Liberal. He has run for preselection, he’s held official positions in our party. He is now the leader of our party. If Malcolm wanted to join the Labor Party I’m sure he could have.

Helen Dalley: It’s nonetheless very destabilising, isn’t it?

Julie Bishop: But he didn’t. And of course there are going to be Labor people who were trying to get Malcolm to join their party. Who wouldn’t’ want somebody of Malcolm’s character and experience and intellect in their party? But Malcolm Turnbull has always been a Liberal. He’s in our party, he’s our leader. He’s a man of great character, great personality. His intellect and his analytical mind are unsurpassed in the parliament and if he were given the opportunity to be prime minister of this country he would bring his capacity for creative thought, his experience and his knowledge to the role.

Helen Dalley: Okay, Julie Bishop, we will leave it there. Thanks so much for your time.

Julie Bishop: Thank you, Helen.

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Julie Bishop lives on

... channeling her "understanding" through this bloke, Michael Keenan MP, the Shadow Minister for Employment and Workplace Relations.

An amiable looking bloke, but listen to what he says.

This was Thursday, after the employment figures came out:

Mr KEENAN (Stirling) (3.55 pm)—Since 1 January
this year, 80,000 Australians have lost their jobs.
That is well over 1,200 jobs lost per day.

Anything wrong with that statement?

Hint: You can see what happened to employment on the graph below:


Employment has grown slightly, not fallen, since the beginning of the year.

Perhaps the employment spokesman didn't read the employment figures.

Or perhaps he did.

He is just an election away from becoming Australia's Employment Minister!

Uggg!!!

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What if Joe Hockey is Julie Bishop in new clothes?

The Coalition's new economic supremo may not be the ticket to credibility it urgently needs.

His predecessor Julie Bishop was ineffective not only because of what she calls the "ongoing commentary" about her role, but also because she didn't understand economics.

Within weeks of last year's May budget she was calling on the Prime Minister to "explain the reasons behind the budget forecast that 134,000 jobs will be lost in Australia by June next year."

But the budget hadn't made such a forecast. Quite the opposite. It had forecast a continuing increase in the number of Australians in jobs, albeit a smaller one that would be needed to stop the unemployment rate climbing.

The Shadow Treasurer had failed to understand the relationship between employment and unemployment. And she appeared not to have read the forecasts in the May budget...

She kept making the claim until November.

In December as the government began running down its projected 2008-09 surplus she said it had "spent virtually the entire reserves of the budget, the $21 billion that was built up over ten years - that money has now gone".

But the reserves that had been built up over ten years (far more than $21 billion) hadn't gone. They were still sitting in the Future Fund where the Coalition had left them. She had confused one year's budget surplus with an accumulation of budget surpluses. She had confused part of a flow with a stock.

It's the sort of confusion common among people who have difficulty getting their heads around mathematical concepts - people who have chosen not to specialise in the study of mathematics or science or economics.

This doesn't mean that the rest are innumerate, but it does mean that they haven't been drawn to the study of mathematical concepts.

As Julie Bishop said yesterday, she asked for the Treasury portfolio because "it had been something of a tradition in the Liberal Party for the Deputy Leader to hold that portfolio".

An astonishing 13 of the Coalition's 17 tertiary-educated frontbenchers are lawyers, among them Julie Bishop and Joe Hockey.

Lawyers can master economics, although it may not come easily. Peter Costello managed it. But it requires a different way of thinking and a genuine feel for mathematical relationships.

A week ago on Lateline Joe Hockey failed to demonstrate that feel. Confusing the current account deficit with the budget deficit he insisted that it had never reached 6 per cent of GDP, which is where it is. He's looking like a Julie Bishop.

The man he pipped at the post for the top economics job, Andrew Robb is one of the few Coalition frontbenchers to have an economics degree.

HT: Anonymous commenter

Edited, see correction

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It's Joe Hockey!

Oh my...

Malcolm Turnbull: "I today announce changes to the Shadow Ministerial line-up.

The changes include three movements within the Shadow Cabinet, and an additional responsibility for one Shadow Minister and the Senate Opposition Whip.

The Deputy Leader of the Liberal Party, Julie Bishop, will assume the role of Shadow Minister for Foreign Affairs. I reiterate my great appreciation to Julie for her work as Shadow Treasurer and look forward to continuing to collaborate closely with her as Deputy Liberal Leader.

Joe Hockey will take on the responsibility of Shadow Treasurer. Senator Helen Coonan will be Shadow Minister for Finance, Competition Policy and Deregulation. Joe and Helen, both of whom served in Treasury portfolios in the previous Coalition government, will present a formidable team to take on the Rudd Government over its mishandling of the economy and bungled response to the Global Financial Crisis.

Shadow Minister for Education, Apprenticeships and Training, Christopher Pyne, will take on the additional responsibility of the Manager of Opposition Business in the House of Representatives.

Given the heavy responsibilities of the Shadow Finance Minister in the Senate, Senator Stephen Parry will take over responsibility as Manager of Opposition Business in the Senate in addition to his role as Opposition Whip.

These changes to the Shadow Ministry strongly position the Coalition to continue to hold the Rudd Government to account for its misguided economic decisions – most recently the poorly targeted $42 billion spending package which will not create jobs, saddles future generations with an enormous debt, and leaves us less secure as a nation."

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Bishopwatch - She's stepped aside

Statement by Deputy Leader: 

"As Deputy Leader of the Liberal Party, I am given the privilege of choosing portfolios.

When our Leader Malcolm Turnbull was elected last year, I chose the Treasury portfolio because it had been something of a tradition in the Liberal Party for the Deputy Leader to hold that portfolio and because I believed that with Malcolm and others this would give the Opposition a strong and effective team in the area of economic management.

While I believe I have carried out my duties as Shadow Treasurer diligently and competently, I have formed the opinion that the ongoing commentary on my role has been a distraction from the scrutiny that should instead have been applied to the Government’s reckless economic performance.

I have concluded that it is in the best interests of the Coalition for me to change portfolio so that the focus returns to the scrutiny of the Labor Government. I have chosen Foreign Affairs because of the importance of retaining the international standing and influence of Australia that was achieved under the former Coalition government.

As Deputy Leader of the Party I will continue to work with my colleagues to ensure that Malcolm Turnbull is the next Prime Minister of Australia and that the Coalition will be able to restore prudent and responsible economic management for the benefit of all Australians."

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Bishopwatch: She's called a press conference in the park across the road from her office

In Subiaco.

9:45 am Perth time (11:45 am EDST)

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Bishopwatch - the end game

It has to happen. It's unpleasant. But for the Coalition the sooner the better.

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But he was right!

Mark Crosby points me to this video account of how the "experts" treated a forecaster who was right:



(Note the cameo role by Julie Bishop's taxation specialist of choice, Arthur Laffer.)

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Vindication for Julie Bishop

In November the Shadow Treasurer informed us that:

"In the May Budget the Government forecast that 134,000 jobs would be lost in the next 12 months."

It didn't. In the May Budget it forecast growth in the number of jobs of 0.5 per cent.

But it has now. In this week's updated Economic and fiscal Outlook the government forecasts a fall in the number of jobs of 0.25 per cent.

Ms Bishop was "right", early.

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TUESDAY COLUMN: It's a Budget, not a package

It is not helpful to think of the statement Kevin Rudd is about to present as a "stimulus package". It is more helpful to think of it as "mini-budget".

Remember mini-budgets?

Whenever some totally unexpected development had rendered the budget forecasts and strategy meaningless, the whole thing was redone and presented afresh.

The Whitlam government had two of them in three years. They added to an aura of crisis. And there was indeed a crisis. Perhaps because of that the mini-budget fell out of favour in subsequent years, being replaced by the blander-sounding "economic statement".

Kevin Rudd's statement will be a mini-budget in all but name...

He revealed Monday that it will be presented to the parliament, it will include updated revenue and spending forecasts, it will include updated economic forecasts, and it will detail a range of spending and taxation measures across a number of fronts. Taken together these things define a budget. Delivered months before the budget is due, they define an emergency budget.

There's no doubt that we need one. The Opposition has been rightly calling for updated economic forecasts for months. The most recent official forecasts, delivered in November have been rendered laughable. They talk about $40 billion in lost tax revenue. This week's statement will tell us it's $115 billion. The November forecasts had economic growth slipping from 2.75 per cent to 2 per cent. The International Monetary Fund now has it sliding to minus 0.2 per cent.

Especially disturbing is the erosion in income tax revenue. Back in November, well into the global financial crisis, the government expected hardly any hit to income tax revenue. Almost all of the hit was to be taken by company and capital gains tax revenues.

This week's statement will predict a $13 billion collapse in income tax takings in coming years - something that can be reconciled with very big job losses. The November update had employment actually increasing in each of the future years. The Rudd mini-budget will have it sliding.

It is important that it is a proper mini-budget with proper forecasts because taking us into its confidence is about the most important thing the Prime Minister can do. As he makes a point of telling us, "we're in this together".

Many of the specific measures will be exactly what we need. The billions to be spent insulating homes will not only soak up some of the expected unemployment, they'll also set us up to live better when the recession, if not the heat, is over.

Anything the Prime Minister tries is unlikely to do much harm - at least right now, and nothing he tries will be enough.

Kevin Rudd says he hasn't given up on escaping a recession - he says he will "move heaven and earth" to avoid one. But heaven and earth won't be enough. The flood of the money that was coming into Australia is slowing to a trickle. Japan - still our biggest market despite the talk about China - cut its industrial production by 10 per cent in December. China's economic growth has halved. And those of us who have lost 30 per cent of our wealth or are worried about losing our jobs are unlikely to resume spending like we used to however much money he shovels our way.

Financial markets are expecting the Reserve Bank to cut interest rates by one complete percentage point today to their lowest level on record. They might be surprised - the Bank might cut by more. But that won't be enough either.

The most that we can hope for is to minimize the extent of the recession and the long-term harm it does to the people it throws out of work. And to apply band-aids where the financial system breaks down.

The $4 billion so-called RuddBank to assist property developers is no more or less than a necessary housekeeping measure to keep credit flowing. It is hard to see how it deserves political criticism.

Kevin Rudd yesterday described the Opposition's approach as "one rolling political frolic". It's easy to agree.

On Sunday its Treasury Spokesman Julie Bishop frolicked in fields where serious decisions need to be made by calling on the government to introduce "broad and sweeping tax cuts that will increase the tax base and increase tax revenues".

No-one I know of thinks that sweeping tax cuts that will increase tax revenues, certainly not in the present environment. But she issued a follow up statement saying there was Australian evidence for the proposition.

When I emailed her office asking what the evidence was they emailed back two studies, neither of which showed any such thing. When I asked for clarification her office put me onto the Opposition's external tax consultant Henry Ergas who was in Papua New Guinea.

It's an awful look for an alternative government at a time of crisis.

It isn't developing its own coherent plan (at least deeply enough to understand the research it is purporting to rely on) and it is carping at the government's attempts to do the right thing.

The Rudd mini-budget will be far from perfect, but it will help.


From Julie Bishop's office, Monday February 2:

As regards corporate income tax, the OECD (Fundamental Reform of Corporate Income Tax, 2008) shows that while effective tax rates on corporate income in the OECD area declined from over 30% in the early 1980s to about 20% in 2004/5, corporate tax paid as a percentage of GDP for the OECD area increased from about 2.2% to about 3.5%.

Also Harvard Professor Martin Feldstein estimated (Journal of Political Economy, 1995) that a 1% reduction in the marginal tax rates on personal income increased taxable income by between 1% and 3%. Since then many other studies have been undertaken, and while some find lower estimates, many others find estimates that are higher. At the same time, there is evidence that reductions in the highest marginal tax rates (which are typically found at the low and high end of the earned income distribution) give rise to the greatest positive response.


From me:

The reports you have sent me do not back up the Shadow Treasurer's statement.

What she said in her press release was:

"It has been the experience in Australia and other OECD countries that reducing tax rates and expanding the tax base increases tax revenues."

The OECD report examined corporate tax. It did not say that reducing corporate tax rates brought about increased corporate tax revenues. Indeed, it looked to other explanations for the growth in corporate tax revenue and was uncertain whether corporate tax collections would continue to keep pace with GDP if, as it expected, corporate tax rates continued to slide:

Here is its guess as to what is at play:

"This might partly have been caused by the broadening of corporate tax bases, for
instance through the provision of less generous tax depreciation allowances. Corporate tax
rates will probably continue to decrease in the near future. However, whether it will be
possible to further compensate these rate reductions by additional base broadening
measures remains to be seen."

Feldstein's JPE paper examined personal income tax. It made no finding that reducing tax rates increases tax revenues.

It summed up its finding this way:

"a change in income tax rates has substantially less impact on revenue than would be true if there were no behavioural response to marginal income tax rates."

It expects cutting income tax to cut tax revenue, but not by as much as would be the case without behavioural responses.

Do you have anything that backs up the claim made in the press release?

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Julie Bishop "explains" herself

...raising more questions.

Joshua Gans reckons the real slip up is this:

"And there’s plenty of evidence to show that the multiplier for a tax cut is greater than that of a direct government spend."

He asks: "Whadda you say what? Since when?"

Here's her "clarifying" statement released late today:

"There is substantial evidence to show that tax cuts, including lower marginal tax rates across all tax brackets and cuts to corporate tax, increase productivity by providing incentives to individuals and businesses to work, invest, take risks and pursue entrepreneurial activity.

The new growth in jobs and output will expand the tax base and thus tax revenues.

It has been the experience in Australia and other OECD countries that reducing tax rates and expanding the tax base increases tax revenues. This requires reductions that are durable, credible and wide-ranging and that help reduce the distortions taxes create to incentives to work, save and innovate."

Really?

Show us the evidence, Ms Bishop. This will be fascinating.

My account of some related evidence is here.

And also here and here.

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Julie Bishop is at it again!

"We would be urging the Government to include in any stimulus package, tax cuts, broad and sweeping tax cuts that will increase the tax base and increase tax revenues"

What on earth is she talking about?

The full transcript of today's typically peculiar interview is below the fold:

Sky News
Sunday Agenda
Shadow Treasurer, Julie Bishop
1 February 2009

Helen Dalley: But first the deepening global financial crisis. Overnight at the Davos Forum in Switzerland global leaders had a simple message; trade is the best economic surplus. The problem is that no one really knows what will work; whether to cut taxes, distribute one-off payments to those who need it, or to start spending more on buildings, roads and bridges, or a combination of all three. In Australia, Treasurer Wayne Swan has been talking about a stimulus package that has warlike “overwhelming force.” He, and the prime minister are said to be preparing a hybrid package which could include targeted tax cuts worth $2.75 billion for low income earners.

The Opposition on the other hand is arguing for broader and more permanent tax cuts. One of the chief supporters of that position is the Deputy Opposition Leader and Shadow Treasurer, Julie Bishop, who joins us now from Perth.

Julie Bishop, welcome to Sunday Agenda.

Julie Bishop: Thank you. Good morning Helen.

Helen Dalley: Now what do you think of the report in newspapers this weekend saying the government is considering tax cuts for low income earners, perhaps raising the tax offset to $1500 and/or lifting the 30% tax rate threshold to $37,000?

Julie Bishop: Well, Helen these are unprecedented times in that there’s no direct analogy with what we’re experiencing at present, but that doesn’t mean we ignore the lessons of history. In fact, this is the time to remember the past, and what has worked in the past, and it’s necessary for us to focus on policies that don’t just rely on a temporary injection of spending to stimulate the economy. History has shown that that just does not work, and the Rudd Government’s attempt last December to inject $10.4 billion into the economy as a temporary measure will prove to have not worked. It certainly won’t create the 75,000 additional jobs that the treasurer promised. But if the government ...

Helen Dalley: Sorry. On that score ...

Julie Bishop: ... is considering ...

Helen Dalley: On that score are you saying that $10.4 billion stimulus package has not worked?

Julie Bishop: Well, we’re still to see the final results, but I suspect it will not have the desired outcome of stimulating the economy. It certainly will not ward off recession and it certainly will not create, as the government promised, an additional 75,000 new jobs. Now the government is considering a second stimulus package; the first obviously has not worked and so within two months they are considering a second.

The point that the Opposition has been making since last year is that a stimulus package ought include as a centre piece tax cuts, because tax cuts drive productivity growth and they act as an incentive for people to work, for people to invest, to take risks, to increase entrepreneurial activity, and that’s what we need in our economy right now. And there’s plenty of evidence across the world that permanent tax cuts do stimulate the economy, but temporary one-off injections do not.

Helen Dalley: All right. If the government proposes a stimulus package that doesn’t include tax cuts, will the Opposition vote against it?

Julie Bishop: Well, it would depend what the package included, but we would be urging the government to include in any stimulus package tax cuts, broad and sweeping tax cuts that will increase the tax base and increase tax revenues.

Helen Dalley: Okay. If it doesn’t ...

Julie Bishop: Now there is plenty there ...

Helen Dalley: ... include that will you vote against it?

Julie Bishop: Well, it depends what else is in the package because there’s no one answer. Nobody has the single answer to stimulating the economy. And we’ve not said it’s either/or. We’ve said that tax cuts, broad-based tax cuts should be included in a stimulus package. And there are many senior economists are the world, including the IMF, who are urging that position that tax cuts be included in any stimulus package. Now, whether it merits or otherwise other ...

Helen Dalley: Excuse me Ms Bishop.

Julie Bishop: ... details of the package we’ll have to wait to see.

Helen Dalley: Shadow Treasurer, if I could just interrupt there, the IMF ...

Julie Bishop: Sure.

Helen Dalley: ... in fact is saying very strongly that tax cuts are not the way to go right at this moment and their most recent position on this was very much that you need that short-term injection to boost spending in the economy.

Julie Bishop: Well, in fact last week the Deputy Director of the IMF was urging that tax cuts be part of the mix, and that’s the point. It’s not either/or and we’ve never said that. What we’ve urged the government to do is to look at tax cuts to individuals, and particularly to business. Business needs to be relieved of the burden of taxes at this time so that their payrolls can continue to sustain workers; taking on new staff, paying off their bills. We need to ensure that business is sustainable, and part of that is to relieve the tax burden on business. That’s why we are urging the government to make tax cuts to individuals and business a centerpiece of any further stimulatory package.

Helen Dalley: It’s interesting the Opposition quoting the IMF because specifically this week Monsieur Blanchard said, and I quote, “measures must be focused on spending rather than taxes because cutting taxes in the short run don’t increase spending”. Now that’s a pretty clear vote against what you’re proposing.

Julie Bishop: Well, the IMF like every other person around the world does not have all the answers because last week the deputy director was urging tax cuts. And if you read the detail – I mean we can pick out one line here or one line there -- but overall the IMF is saying each country should tailor their responses to their country’s circumstances. Now Australia is in a very different position from countries like the United States or the UK and yet the government appears to be responding as if we are in the same dire straits as Europe, the United States, the United Kingdom. Australia is not. We have very strong underlying economic credentials. We had a surplus. We had very low unemployment. We have a very strong banking sector. We have a strong regulatory system. So responses that might work or might be considered in the United States and the United Kingdom are not necessarily the responses that you would have in Australia given our particular circumstances, and we urge the government to consider tax cuts.

Now just to dismiss them out of hand goes against the weight of evidence and is most certainly the view of some very senior economists that I spoke to in the United States just last week.

Helen Dalley: Julie Bishop, the Treasurer this morning has said that a temporary budget deficit is now inevitable. What’s your reaction to that?

Julie Bishop: Well, again as the IMF said, and as we have been urging for months now, if the government is going into deficit it must have a plan to put the budget back into balance. If the government chooses to go into deficit it’s a discretionary spend then there must be a strategy to exit it, and that was another position put by the IMF this week. So we would call on the government to tell the Australian public how they will balance the budget. If it’s going to be a temporary deficit how do they intend to get out of it? The government doesn’t have any money of its own. This is taxpayer’s money. This is money that taxpayers have provided through their work and enterprise and the work of businesses and the earnings of businesses. So if the government goes into deficit it’ll be taxpayers who are paying it off. And to restore business and consumer confidence people need to understand how the government proposes to do that.

Helen Dalley: Okay. The Business Council has also said this morning that a budget deficit is now almost inevitable. But they are saying that is quite acceptable and responsible for a government to do what it can to minimise the effects of the recession. Do you accept that?

Julie Bishop: Well, Helen, look at what’s happened over the last few months. The government had a forecast budget surplus of $21 billion. It decided to use $10 billion of that in a one-off temporary stimulus package. Now I believe the consensus willl be in due course that that didn’t work. So the government’s chosen to spend half the budget surplus in one hit. Now we support payments to pensioners but just not a one-off hit, that doesn’t change people’s spending habits. So it’s a question of the quality of the spend. If the government goes into deficit it depends upon what it is spending the money. Now infrastructure spending and spending on education are all worthwhile initiatives in their own right. You don’t need an economic crisis to spend on infrastructure and education, but it’s the quality ...

Helen Dalley: So the Treasurer ...

Julie Bishop: ... of the spend that will be important.

Helen Dalley: Yes. The Treasurer this morning has said that will encompass, it will be across a lot of those areas, including infrastructure. Is that something that you can accept if we go into budget deficit?

Julie Bishop: Well, infrastructure spending as long as it’s high quality spending is a good outcome in any event. You don’t need an economic crisis to spend appropriately on infrastructure. But let’s not kid ourselves that infrastructure spending is a short-term stimulus to the economy. Infrastructure by its very nature is long term and so over the long term it will have a beneficial effect, but it doesn’t provide the short-term stimulus that the economy needs. That’s why we’ve been urging tax cuts, permanent tax cuts so that people can use their after-tax dollars, the money that they get in their pocket over a period of time to keep spending, not saving.

Helen Dalley: Okay. The Treasurer ...

Julie Bishop: And there’s plenty of evidence to show that the multiplier for a tax cut is greater than that of a direct government spend.

Helen Dalley: The Treasurer has also said this morning that company taxes could be down by $50 billion over four years. Now that’s almost a fact now and that has come really over the last four or five months since the mid-year economic review. That’s something in a sense the government can’t control. Now will you accept that the budget probably needs to go into deficit simply because of that?

Julie Bishop: Well, what the government needs to do is balance the expenditure with likely revenues and so that’s a juggling act that must be done by governments all the time. Now Kevin Rudd said he was an economic conservative. He went to the last election even promoting advertisements about himself that he was an economic conservative. That meant he believed in smaller government; he believed in balanced budgets; he believed in surpluses; he believed in lower taxes. Today we find that Kevin Rudd’s no longer an economic conservative. What we need to hear is what the government proposes to do in terms of savings; what the government intends to do in terms of expenditure. The mid-year economic forecasts are clearly out of date. The government’s acknowledged that they’re out of date. Well that’s not good enough. They need to provide updated treasury forecasts of the current state of the budget so that we all know what state the budget’s in as well as updated forecasts on government expenditure, growth, unemployment and the like.

Helen Dalley: All right, Julie Bishop we’re almost out of time. Just really briefly if you could, the proposed boost for commercial property that the prime minister announced a few days ago, you and your leader have criticised it saying it’s only helping the big banks. But it’s really only $2 billion government contribution. Now it has to be voted on through parliament. Will you vote against it?

Julie Bishop: Helen, it’s actually up to $26 billion of taxpayer’s money. And as I said we should never forget the lessons of history. I witnessed in Western Australia in 1987, after the stock market crash, when a Labor Government got involved in the commercial property sector, very similar. And what happened, it ended up as WA Inc. When politicians get involved in the commercial property market it ends up with more bad loans.

Helen Dalley: All right. Ms Bishop, thank you so much for joining us, we appreciate your time this morning.

Julie Bishop: Thank you.

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Who ran up and who paid off debt

Commenter Marek asked whether Julie Bishop could possibly be right when she said that it took the Coalition ten years to pay off $96 billion of debt left by Labor.

The figures are here, and below - click to enlarge.

Julie Bishop is right. The Coalition paid off Labor's debt. It did it by selling just about everything it could lay its hands on apart from Australia Post.

Telstra accounted for the bulk of it (although the government got a bad price for the first lot of Telstra).

Selling Telstra meant that the government missed out on its dividends. It helped government finances not at all.

It was as if a farm sold it cows to pay off its debt. It would become debt-free, but would miss out on milk and the earnings from selling it.

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Here's the Opposition's line - responsible, measured...

"Today the Prime Minister has announced his intention to plunge Australia’s budget into deficit.

The Prime Minister claimed that this would be a ‘temporary deficit’.

Experience tells us that Labor deficits are never temporary.

We have seen what happens when Labor governments drive budgets into deficit.

Like a drug, Labor is addicted debt.

The last ‘temporary’ Labor deficit ran for 6 years until the defeat of the Keating Government in 1996.

Labor’s definition of a temporary deficit is what Australia has to have until a Coalition government makes the tough decisions required to repair the economic damage.

It took the Coalition ten years to pay off the $96 billion debt left by Labor’s last ‘temporary’ deficit.

Australian taxpayers paid an interest bill of $8.5 billion a year on that ‘temporary’ deficit.

On the current growth forecasts there is no reason for the Prime Minister to send Australia’s budget into deficit.

On the Government’s own figures growth next year will be 2%.

12 months ago the Rudd Government inherited a $20 billion surplus.

Today the spectre of deficit looms."

Julie Bishop MP

Deputy Leader of the Opposition

Shadow Treasurer


Oh my.

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Another Bishop howler

From a press conference a few moments ago:

"In the May Budget the Government forecast that 134,000 jobs would be lost in the next 12 months."

Er, Julie, in the May budget the Government forecast an increase in the number of jobs.

This is becoming concerning.

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An incredible statement

Shadow Treasurer Julie Bishop, today:

JOURNALIST: Does the Opposition have any idea on how to free up those frozen funds?

JULIE BISHOP: If the Government had not put in place an unlimited guarantee in the first place this would never have occurred.

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The goverment is helping, H-E-L-P-I-N-G

Get it?

The Government may be on the ropes over its decision to guarantee bank deposits, but the Opposition is going over the top.

How’s this for an overegged claim?

“The government’s own actions have caused greater instability in the Australian financial markets than any event that has occurred overseas”.

That’s from the Opposition Treasury Spokesman Julie Bishop.

What about this from the Opposition Leader Malcolm Turnbull?

“We have seen institutions not covered by the deposit guarantee losing money, we have seen funds putting a stop on redemptions, we have seen savings frozen.”

We have indeed seen those things. Perpetual, AXA and Australian Unity each put some sort of freeze on their redemptions late yesterday.

But it’s a stretch to say they did it primarily because the government guaranteed bank deposits...

Bank deposits have always been implicitly guaranteed by the government. They have always been regarded as safer than the funds run by the likes of Perpetual, AXA and Australian Unity.

Money was always going to be moved out of the Perpetuals and into the banks as soon as global financial troubles turned into a global financial crisis.

Explicitly guaranteeing bank deposits (and also deposits in building societies and credit unions) doubtless accelerated the trend. The Reserve Bank and the Prudential Regulation Authority have said so.

But it didn’t cause it. We would have had instability, a run on funds, and funds frozen without it.

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The Shadow Treasurer's bumpy debut

**Updates below

Julie Bishop has been labelled “the Helen Demidenko of Australian politics” after she at first denied - and then conceded - that part of her maiden speech as Shadow Treasurer was lifted from theWall Street Journal.

The speech, delivered in Parliament Monday just moments before a radio interview in which she stumbled when asked to identify Australia’s official interest rate, included two sentences found in their entirety in a Journal article about the US financial crisis dated 20 October.

In Question Time yesterday the Treasurer Wayne Swan congratulated his opposite number on what he said was “an insightful piece of analysis”. But he said it sounded familiar and then read out the two sentences from the Journal article along with identical sentences from Ms Bishop’s speech...

“I have taken advice from many quarters, but I have never stolen something directly from the Wall Street Journal and passed it off as my own wisdom,” the Treasurer told Parliament.

“I think following this that the member for Curtin will be forever known as the shadow minister for plagiarism — the Helen Demidenko of Australian politics! Two gaffes in 24 hours is quite a start from people who are lecturing others about competence and standing in the community.”

In a personal explanation to the House Ms Bishop denied that she had plagiarised the article.

“In my speech I was referring to the United States plans. In fact the words I used were the technical explanation from the US Treasury Secretary Henry Paulson, which have been published widely,” she said.

“It is a shame that the Treasurer seeks to smear rather than manage the economy.”

However later, in an interview with The Age, Ms Bishop conceded that many of the words in question had been taken only from the Wall Street Journal article and not from the Treasury Secretary.

But she said she wasn’t wrong in her explanation to the House.

“No I was not. I was very careful,” she said.

“My whole point was they called me the Helen Demidenko of politics. I made the point that the entire speech was not a lift of opinions and ideas of the Wall Street Journal. The words I used were a technical explanation of the plan that has been published widely.”

When told that they had been published widely in that form only in the Wall Street Journal article, she replied “of course, that’s what I said.”

Asked how those words got into her speech she said she was not going to start pointing the finger at her staff. “That’s not my style. I won’t do it. I have said publicly I did not read the Wall Street Journal.”

“If quoting out of the media without attributing it on every occasion is going to be the subject of this sort of coverage, then people are going to be very busy going through every person’s speech. If we are really going to do these Google searches to make sure that every word is original, I think our priorities are a little skewed in the face of this crisis.”


The sentences found in both:

Among the things the government is asking for is the authority to hire asset managers to oversee the buying of assets.

The proposal would give the Treasury secretary significant leeway in buying, selling and holding residential or commercial mortgages, as well as "any securities, obligations or other instruments that are based on or related to such mortgages."


UPDATES:

Samantha Maiden - Australian Online

"JULIE Bishop has now been accused of altering the parliamentary record over her defence against allegations she gave a speech that plagiarised the Wall Street Journal.

MPs and senators are sent the parliamentary record - known as Hansard - each evening before it is printed, allowing MPs to change their words if they don't like it.

Labor's leader of the house, Anthony Albanese, said today the Hansard did not record her actual words on the plagiarism gaffe.

“It records the deputy leader of the opposition saying: `In my speech I was referring to the United States' plans, and in fact, the words I used were the technical explanation of US Treasury Secretary Henry Paulson's plan which have been published widely'.”

Labor says in response, Ms Bishop told parliament: “In my speech I was referring to the United States' plans. In fact, the words I used were the technical explanation from the US Treasury Secretary Henry Paulson which have been published widely”.

The difference is whether Ms Bishop says she used Mr Paulson's words or “a technical explanation of” his words."

Samantha Maiden - Australian Online

"MALCOLM Turnbull has been dragged into the plagiarism row engulfing his deputy Julie Bishop, with revelations it was his office that cut and pasted words from a Wall Street Journal article.

Today Coalition sources confirmed the offending paragraphs of background were provided for her speech from the leader's office. That information was then passed on to Ms Bishop's office.

Ms Bishop was understood to be "ropeable" about the error but willing to take the public flak rather than blame others."

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