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Press Conference

Tuesday, 6 August 2013

Errors and Omissions Excepted

 

transcript

The Hon Joe HOCKEY MP

 

SHADOW TREASURER

Press conference
caNBERRA

 

TUESDAY, 06 AUGUST 2013

 

E&OE…………………………………………………………………………………

 

JOE HOCKEY:

Ladies and gentlemen, the Coalition welcomes the decision of the Reserve Bank to cut the cash rate today to just 2.5%, which is well below the 3% Kevin Rudd described as an emergency level on 4 November, 2009. The Reserve Bank has cut interest rates to record low levels because the economy is struggling under Kevin Rudd. Let's look at the facts. Despite still high terms of trade, high commodity prices and low inflation, Government debt is rising - approaching $400 billion. Government deficits are getting bigger - a deterioration of $3 billion a week - and consumer and business confidence is flat. Retail sales growth is now at decade lows. In fact, business and consumer confidence in the United States is in better shape than business and consumer confidence in Australia. One of the key reasons for this is that Australians are worried about their jobs. It is damn hard to pay off a mortgage if you haven’t got a job. The fact is, unemployment is rising rapidly under Labor and it’s going to continue to do so. The cut in interest rates will be welcomed by Australians that live every day with the burden of debt. The Coalition cares deeply about the cost of living challenge. But no matter how significant the cost of living challenge, it is damn hard to meet those bills if you haven’t got a job. The fact is unemployment is now rising rapidly under Kevin Rudd. Labor is now forecasting unemployment to rise to 6.25% by the middle of next year. They inherited an unemployment rate with a ‘4’ in front of it and that means that 800,000 Australians will be out of a job under Kevin Rudd. I’d say to you again today, this interest rate cut is about a struggling economy under Kevin Rudd. It’s not a great credit to this Government at all. In fact the concern is that we are heading in the wrong direction whilst the rest of the world is heading in the right direction in relation to economic growth and employment. There is a better way and the better way comes from the Coalition. We will get rid of the taxes that cost jobs like the carbon tax and the mining tax. We will live within our means. We are not going to have the cash splashes that Labor has already started on, yet again. We are going to roll out a six point productivity plan that focusses on reducing red tape, better coordination with the States, a more sensible approach to industrial relations, infrastructure that really does matter and better workforce participation. Ultimately, we will also focus on the growth opportunities for Australia, which means a proper relationship in the region with our business partners. Finally I’ll just say this; if the economy was performing well, the Reserve Bank would not have moved today to what is now 50-year record lows. It’s about time we deal in facts; it’s about time we deal in reality. Mr Rudd is sounding increasingly hysterical and shrill and that’s because he just doesn’t get it. He doesn’t understand the economic challenge and that is why he thinks debt and deficit and rising unemployment is okay. Questions?

JOURNALIST:

Hasn’t the Government actually made room for the Reserve Bank to move interest rates?

JOE HOCKEY:

The Reserve Bank has had to lower interest rates because the Government has abandoned the leadership role it should have in the Australian economy. There’s no doubt about that. The deficits are getting bigger and if you can’t trust the Government’s numbers over a 10-week period, Lord knows whether you can actually take seriously any suggestion of reasonable numbers for the next four years.

JOURNALIST:

Can you make the promise that John Howard made in 2004 that interest rates will always be lower under a Coalition Government than a Labor Government?

JOE HOCKEY:

On average, over the political cycle, that is the truth. That is the truth because if you actually look at the economic circumstances when John Howard made that pledge in 2004, October 2004, unemployment was 5.1% at that time. Currently it’s 5.7 going to 6.25. In October 2004, economic growth was 4%, well above trend. Today, it is 2.5%, just been revised down and inflation obviously was under control, because the Reserve Bank moves within an appropriate band. But I do want to say something about looking at the importance of what people pay, and that has been lost a bit under the circumstances. The difference between the cash rate and what people actually effectively pay has grown significantly under Labor. In November 2007, the spread on the small business variable rate that Labor inherited was 3.55%. Today it is 6.45%. No-one’s paying the Reserve Bank cash rate - they pay what the banks are charging. The gap between what the Reserve Bank cash rate is and what the banks are charging has increased significantly under Labor, in fact almost doubled. For a standard variable home loan it was 1.8% - the difference between the cash rate of the Reserve, when Labor inherited, and what people actually paid. Now it is 3.45%. As you can see, the fact of the matter is, we can argue the case that over the cycle, interest rates will always be lower under the Coalition than they are under Labor.  But these are now at record lows and emergency levels because the economy is struggling.

JOURNALIST:

That question that Dennis put to you was put to Tony Abbott today and he said and he reframed it and said the economy will always be stronger under a Coalition Government. Isn't the flip side of that that the interest rates will always be higher under a Coalition Government if you're comparing to the present situation?

JOE HOCKEY:

No. You have got to compare apples with apples.

JOURNALIST:

Can I ask that a different way then? If you become Treasurer, presumably you intend to run a good economy. Would a measure of you

JOE HOCKEY:

It's more than an intention.

JOURNALIST:

Good to hear. Would a measure of you running a good economy, being that interest rates would need to rise?

JOE HOCKEY:

That would be a matter for the Reserve Bank. But the fact of the matter is - if you are setting the benchmark - and Labor is setting the benchmark of a successful economy as where the interest rates are at today, well the United States, United Kingdom and Japan must have rocketing economies. But they don't because we are in an entirely different environment and Kevin Rudd doesn't understand that.

JOURNALIST:

Should we be assured by your comments today that the interest rates should at least be higher than emergency levels of 3%?

JOE HOCKEY:

The fact is we would have a different economy today if the Coalition had been in Government for the last six years. We'd have a more prosperous economy. We would have certainly no carbon tax, no mining tax. We would be in much better shape. There would be an air of confidence. I ask you to think about why we haven't got business and consumer confidence going the way it should be. If everything is fine, as the Labor Party suggests, why do we have record lows in retail sales growth? Why do we have that? I would just refer you to Glenn Stevens' previous comments about the economy where he said on numerous occasions and he said just on 2 July 2013, "The economy is growing a bit below trend, unemployment rate has edged higher over the past year." He went on to say that there is no lever for confidence – there is no economic lever for confidence. The only way we are going to get confidence back is to have a real change of Government and that's in the hands of the Australian people.

JOURNALIST:

Can you promise you won't add up the costs of your promises based on something you said earlier today. Is that the case. Are you going to duck out of providing a total?

JOE HOCKEY:

No. We will provide a total of our promises. It won't be hard to work out. You might not even need a calculator or the Labor Party might not even need their abacus. From my perspective and from the Coalition's perspective, we will publish all of our promises and the total cost over four years of those promises. We will publish all the ways we are going to pay for it and all the money over four years for paying for those promises.

JOURNALIST:

Will you have a bigger surplus as a result at the end of the four years?

JOE HOCKEY:

There will be money left over because we want to leave the Budget in better shape. Let me just say emphatically - and this is a very important point - when the Government released UEFO last Friday, there were some grave concerns for me in relation to some of the assumptions. Realistic assumptions of Australia's economic prospects should include 4 year forecasts of nominal GDP, unemployment and the terms of trade. When you actually look at the numbers that the Government uses to justify their surplus forecast in the out years, it's based on mechanical projections. So, for example, the unemployment rate in 2014-2015 is 6.25% and is expected to drop miraculously to 5% the following year which happens to be the year that they say the Budget is going to dramatically improve. But when you compare it with a growth - real GDP, or nominal GDP - the numbers just don't stack up. So what we want is if the Government is fair dinkum, we want the pre-election fiscal outlook to have reasonable projections that properly reflect the distance between their forecasts in 2014–2015 and their projections in 2015-2016 when they claim a surplus.

JOURNALIST:

Are you formally asking them to change the rules?

JOE HOCKEY:

I want to know what the real bottom line is. For the last six years, every number Labor has put out there has been wrong, every number. For the last five years, you know, I have been warning them that their numbers are wrong. I have been proven right. I'm saying again the starting point of the Budget under Labor is unbelievable, unbelievable, the starting point. Normally Governments that get elected say afterwards, "Shock horror, we didn't expect it to be like this." Well, I'm saying it before the election. I know it's not going to be what the Labor Party claims in the pre-election statement they've just released. Therefore I want to flush out the truth of the Budget.

JOURNALIST:

To clarify, will you provide a Budget bottom line figure as part of your election costings?

JOE HOCKEY:

We will provide you with our numbers of the costs associated with policies and the savings to pay for it. But we are not going to make the mistake Labor made and make rash forecasts about what a surplus or a deficit will be in the out years because the starting point is unbelievable. I'm not going to make those mistakes.

JOURNALIST:

You said before you would [inaudible]

JOE HOCKEY:

No it’s not hard Paul. I said we will have our policies and how much they cost, we will have the savings to pay for it, and the difference will be a bottom-line positive.
JOURNALIST:

At the end of the four years?

JOE HOCKEY:

Yes.

JOURNALIST:

Just a broader question. Should you win the election, at what stage will you own the economy and at what stage will it no longer be Labor's fault?

JOE HOCKEY:

We will own the economy from day one, whether it's Labor's fault or not. I'm not afraid to accept responsibility and I'm not afraid to be accountable. We will own it from day one. We will be responsible for the Australian economy. However, you've always got to deal with the legacy and the legacy is a Government that has been addicted to waste and spending. A Government that leaves an unemployment rate with a 6 in front of it instead of a 4 that they inherited. A Government that's leaving $400 billion of debt when they had no net debt which they inherited. A Government that's leaving a $30 billion deficit when they inherited a surplus. A Government that is dysfunctional and discredited and has broken the morale of the Public Service.

JOURNALIST:

You've said that you won’t be providing the Budget bottom line figures because you don't accept the starting point but you've also quoted the higher unemployment rate and the lower economic growth figures that the Government provided. So are you not just selectively choosing which ones you will believe?

JOE HOCKEY:

No.

JOURNALIST:

How does that work then that you are accepting some of those numbers but not others?

JOE HOCKEY:

It is a consensus view. It ends up being a consensus view out of markets, the Reserve Bank and the Government in relation to economic forecasts. But the forecasts go into the bottom line so it's actually the number, the bottom-line number, the cash balance, if you like that is the difference. Economic forecasts form part of that they’re not the entire part of the equation.

JOURNALIST:

John Howard today talked about the GST and how the Labor and Democrats punched a hole, as he referred to it, in the policy that was accepted at an election. He also said that it was obvious that tax reform has to be revisited. Is it obvious to you that the GST needs to be revisited?

JOE HOCKEY:

It is part the equation, we’ve always said that. Tony Abbott in his Budget reply speech said that we were going to have a proper review of the taxation system. But the Liberal Party and National Parties believe in less tax, fairer tax and simpler taxes.

JOURNALIST:

Would that review include increase in the GST but less tax on business?

JOE HOCKEY:

No. I’m not going to pre-empt a review that will occur over the next three years if we're elected. I make the point, every dollar of the GST goes to the State Governments so, as I've said on numerous occasions, the State Government’s have to argue the case for change to the GST because it's their revenue. But I tell you one thing that saps business and consumer confidence, it is when it has left-field tax increases, for example those that have come out over the last few days out of Labor. FBT changes are having a major negative impact on the car industry. Tobacco tax rises which could wipe out a third of the increase of the pension of a pensioner who smokes, and these taxes make all the difference. Now, of course, they've got a bank accounts tax. So Labor's crowing about record low interest rates but if you have a bank account you'll pay more in tax to Kevin Rudd.

JOURNALIST:

What about your $4 billion company tax rise?

JOE HOCKEY:

You're pre-empting something that you shouldn't pre-empt at the moment.

JOURNALIST:

 I'm just going on what Mr. Abbott has been telling.

JOE HOCKEY:

This gentleman here.

JOURNALIST:

Can I ask about your understanding of the caretaker conventions? Do you think that that means now that we're in a position where the Government can’t approve foreign investments, mining developments and environmental approvals?

JOE HOCKEY:

Without consulting the Opposition I would think so, yes.

JOURNALIST:

As Treasurer, should you be elected, your clear responsibility [inaudible] integrity of the Budget. On the FBT, there's no doubt there has been an impact on the car industry of that decision but from a policy point of view, it actually was a legislated way of allowing people to claim a tax deduction to which they weren't entitled.

JOE HOCKEY:

They were entitled by legislation to claim the deduction.

JOURNALIST:

.. allowing a disproportionate use for private, business use of a car. If you do become Treasurer, would you look in consultation with the industry to changing that just to protect the integrity?

JOE HOCKEY:

No. I'm not going to try and anticipate what comes out of a proper review of tax but I'd say this on FBT. The Henry Tax Review made a number of recommendations in relation to fringe benefits tax on motor vehicles. They were picked up by the Government. It was the Greens that actually had the Government costed, if you recall, and the Government picked up those changes and ran with them in the Budget which we understand, they introduced the 20% statutory limit. They went through all that review process and they said, "We're rolling this out for certainty, for employers and employees." Without any warning, without any consultation they changed it, they abolished statutory formula. They claimed at first that people driving Maserati’s and BMWs would be the ones that would be hit. It turned out, after major modeling overnight by one of the major salary packaging firms where they data-mined 30,000 clients, that in fact the people paying the tax would be people on $50,000 to $70,000 a year, most of them driving cars of the value of $30,000 to $40,000, mostly Australian-made cars, Camrys and the like. Now, the Government got its numbers so wrong, that two to three days after the announcement by Kevin Rudd of a new tax on motor vehicles, the Treasury and the Australian taxation office rang up the industry to find out how the industry works. Now you're asking me to take, on confidence, decisions made by this Government when in fact the Government doesn't understand the implications of their decisions. I will not do it. I will not do that to the Australian people. The only way we are going to get the economy growing, apart from solid predictable Government here in Canberra, is to have a Canberra that understands the rest of Australia. To have a public service and a Government that has worked in business because the only way we're going to lift boats is if you lift the tide, so that all boats rise.

 

JOURNALIST:

Returning to the prickly subject of costings, one of the reasons you were out negotiated in the 2010 election was the costings and the criticism that you had a Perth accountancy firm simply count up some numbers. That's the criticism. When we see your costings, will we know how many and what proportion of them have gone through the PBO or any other methodology?

JOE HOCKEY:

Andrew, we are getting into the weeds but let me give you one good example. The Labor Party criticised me recently for consulting State Governments. If in 2007 the Labor Party had have consulted State Governments about the roll-out of the computers in schools program, they would have found, as we found at that time, that a billion dollars wasn't going to deliver the computers in schools because Labor never costed, the cost of additional teachers, additional electricity, air conditioning, new school desks, replacement computers, all those things. Labor never bothered to do that. Kevin Rudd just came out with a big statement about, "We're going to deliver computers in schools for a billion dollars." Of course the program blew out to over $2 billion and it's been killed off. And why? Because Labor doesn't understand that all wisdom and knowledge does not come through the air conditioning here in Canberra. You actually have to speak with people, listen to them, understand how they work in order to develop the best policies to address their needs and we will be going to a number of different sources and I'm satisfied Andrew, that even you will be satisfied. That we've offered the most comprehensive analysis of Opposition policy costings ever and I might even be able to convince you that our numbers are far more accurate than anything the Labor Government has produced. Thank you very much.