The biggest deficit in Australian history, one million people unemployed by next year. The Shadow Treasurer Joe Hockey joins us now in our Parliament house studio. Joe Hockey, Good morning.

Good morning Fran.

Now you call this casino economics, what’s the gamble"

Well the gamble is that the Government is saying it has a plan to get out of the debt and deficit, it is based on heroic assumptions, I mean extraordinary assumption, that neither the IMF nor the Reserve Bank would agree with but what’s more alarming, and is unbelievable is that Kevin Rudd is not going to make a single new major spending decision in the next five years that is going to make that deficit worse. So there’ve got no plan to get out of the deficit and debt, they’ve got reckless spending. Two-thirds - and this is the interesting thing, -Wayne Swan didn’t have the courage last night, for the first time in many many years, a Treasurer got up and gave a budget statement and didn’t even tell the Australian people what the numbers were. First time ever you know, in living memory.

You mean what the deficit is?

What the deficit is, what the debt is. First time.

It’s probably the first time the Government hasn’t mentioned tax cuts too, I’d say.

Yes that’s right, for many years and effectively, and effectively we’ve worked out that they’ve got $188 billion dollars now of new net debt. Two-thirds of that is Rudd Government spending over the last 18 months.

Well that’s the opposite of what the Government says, it says 1/3 of it is spending and 2/3 of it is….

Well what they’re doing is taking the $300 billion, they’re actually borrowing $300 billion and the interesting thing is Fran, the surplus was written off in falling revenue you see, so the falling revenue wiped out the surplus, then we went into debt and 2/3 of that debt is actually spending by the Rudd Government.

You’ve been criticised of the spending by the Rudd Government but given the $210 billion hole in revenue over that, there’s no contention over that, the Government says that if it hadn’t spent stimulus packages that you’re criticising that hole in revenue would be greater, would be deeper and the contraction that we’re about to get next year would be four times larger.

Well let’s make some comparisons, last year, this time last year, Australia was ahead of the rest of the world in terms of saving money, in terms of…

Well the world’s very different now than last year…

This is the starting point; this is a very important point. New Zealand has been in its deepest, much deeper recession than Australia and unemployment is around 5 per cent in New Zealand, not the 8 per cent that Kevin Rudd’s talking about here in Australia. Canada, similar economy to Australia, has smaller deficits, smaller deficits, it’s got about 8 per cent unemployment, smaller deficits.

Yet Australia went into this downturn in better position than any of these countries and what’s happened is we have seen the most unbelievable spending package by the Rudd Government - $124 billion in 18 months. The interesting thing is Fran, the cash splashes – all those cash splashes that were handed out are the equivalent in money to the $22 billion of infrastructure that is the centre piece of this budget.

But the Treasury forecasts there in the budget paper for all to see, is that that money has meant that the slowdown will be 4 times easier than it would have been if it hadn’t spent that money. You don’t believe the Treasurer forecasts?

That’s a voodoo interpretation.

Well they’re from Treasury forecasts…

Yeah I know Treasury forecasts…

Well they’re the same Treasury forecasts you relied on in Government

Well the thing about Treasury is that, and you can understand it, right…

What? The thing about Treasury is that they do what their political masters say?

No, no the thing about Treasury is that they try their best but they’re never going get it right, exactly right ok. But what you can say, what you can say is this: if everyone thought that, if everyone now that we side, we side, Wayne Swan sides, the RBA, the IMF, the Treasury if everyone got it right, how come they didn’t predict what was going to happen. And the thing is…

Because I think we are in unprecedented times with global slowdown

You know, well let me go back to quoting the Reserve Bank from last Friday where they actually said it won’t be as deep for Australia as the 1990 recession. They said that last Friday - it will not be as severe as the 1990 recession. Yet last night Wayne Swan brought down a budget with the biggest deficit in modern history, the biggest debt in modern history and 1 million unemployed.

Are you going to support this budget?

We’re going to be very responsible in our approach.

Well talking about responsibility, the Government’s deficit exit strategy is based on keeping spending growth below 2 per cent in the out years. Do you commit to supporting that?

Oh, come on. I mean how can you believe it? I mean, for example in the same document they say that defence spending is going to increase in real terms by more that 3 per cent for as far as you can see.

Well presumably there are going to be cuts then to offset these

Well where are these cuts? They didn’t have them last night. The total cut that Wayne Swan boasts about, $22billion, you know that’s just 1 per cent of all outlays over the budget?

If that’s the policy measure required to get the budget into balance, or into surplus, this keeping spending outlays, spending growth below 2 per cent, will you commit to it?

I’ll tell you what I’ll commit to, as Liberals have committed to this before - we will deliver budgets with less debt, less deficit and more jobs. Judge us not on our words, but judge us on what we have done.

If you’re judging the budget as it’s handed down last night, are you saying Wayne Swan hasn’t been tough enough? Is that what you’re saying?

Well, he talked tough. He hasn’t delivered.

Should the Government have cut deeper?

Well the Government should have had a plan to get themselves and our country out of this massive spending debt.

They’ve got a plan you just say you don’t believe it

No one believes it. No one’s taking this seriously

Where would you cut? Where would you say the Government should cut?

Well I mean you have to cut in a range of different areas, but for example administration in the bureaucracy. You know the Government now is 29 per cent of GDP, that’s a full 5 per cent higher than the last Coalition budget. 5 per cent of GDP higher. They are on a massive spending spree and you know we wouldn’t have had…

What does that mean? You’d cut public service?

Well you know we wouldn’t have had pink bats, we said this, we wouldn’t have had the cash splashes, we wouldn’t have had $14 billion on school halls. I mean infrastructure is $22 billion on roads, rail and transport but in January this year they spent $42 billion on cash splashes and pink bats.

Its was Treasurer Peter Costello that taught us all about the intergenerational time bomb looming, the demographic time bomb looming, in light of that do you support the rise in the age where people can get the pension?

2023?

Well you have to (inaudible)…

How old will you be at 2023?

Sadly I’ll be looking at 67. Do you support that?

Well I’ll be well older I’ll tell you. 2023. How long would the Rudd Government have been in government? This is the absurdity of it, they talked up and then they have a commitment in 2023. Come on Fran…

Do you support Rudd rasing the age? The pension age?

We will look at the details of it but come on you can’t take these things seriously when they promise to do things in 2023 that just shows you they are incapable of making the hard decision to keep the economy on track.

Joe Hockey, do you like anything in this budget?

Well we welcome the pension initiative, we’ve said that. That’s good initiative, I think it’s also good to invest in the skills in the hospitals to raise productivity, I think that’s a good initiative. But you know what Fran, I really care about growing the pie, focusing on small businesses, on jobs. The engine room of the recovery is the private sector that is going to create the jobs and the wealth to grow the pie which is going to get us out of the mess. Not this sort of reallocating the pie as you said at the very beginning.

Joe Hockey thank you very much for joining us.

Thanks.

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