Print

Doorstop Interview Canberra 1pm Tuesday 16 December 2009

Wednesday, 16 December 2009

Errors and Omissions Excepted

Subject: National Accounts, President Obama’s comments re. pink batts

JOE HOCKEY:

The National Accounts which were released today for the September quarter clearly illustrate that monetary policy and fiscal policy in Australia are working in different directions.   The Reserve bank has increased interest rates every month for the last three months.  The National Accounts are a rear-view mirror snapshot of the Australian economy during the September quarter yet the Reserve Bank has been increasing interest rates every month for the past three months.

We are now entering a period where monetary policy and fiscal policy appear to be working in different directions.  The more the government spends, the greater the upward pressure on interest rates and for all the rhetoric of the government and all the spin of the government, they are still engaging in recession-like expenditure even out to 2012 - long after the single quarter of negative growth in 2008.

Now we once again call on the government to pull back on its massive spending program, otherwise interest rates are going to go up much higher than they need to be.  The more the government spends, the higher interest rates will be.  If Wayne Swan is worried about the economic future of Australia then he should do something about interest rates, because clearly the Reserve Bank is working to tighten monetary policy whilst the government is still running a fiscal program based on 8.5% unemployment and Australia going into recession.

JOURNALIST:

But rates are still at 1967 levels [inaudible] …emergency levels"

JOE HOCKEY:

Well they’ve gone up by 75 basis points in the last three months.  Interest rates are going up.  Markets are factoring in a significant increase in interest rates over the next few months.  Australians need to realise that the more the government spends over the next few months, the more upward pressure there will be on interest rates.

JOURNALIST:

[inaudible]

JOE HOCKEY:

Well this is an issue for the government.  It is a reasonable point to make.

JOURNALIST:

[inaudible]

JOE HOCKEY:

It is clearly the case… Wayne Swan was boasting that monetary and fiscal policy were working together only a few months ago.  Well clearly they are not anymore because interest rates are going up and yet Kevin Rudd and Wayne Swan are maintaining recession-like levels of expenditure, they’re not pulling back one dollar.  In fact, expenditure is increasing by $4 billion as revealed in MYEFO.

JOURNALIST:

[inaudible]

JOE HOCKEY:

Well this is the issue.  The government says that it has monetary and fiscal policy working  together, today’s National Accounts indicate they are clearly working in different directions.  The government clearly has the ability to pull back on its spending, but its spending is political, it’s not economic.  Government expenditure is focused on winning the next election, it’s not focused on the best interests of the Australian economy.

JOURNALIST:

[inaudible]

JOE HOCKEY:

The trend should be that the government pulls back on expenditure which will prevent interest rates going up higher than they should be.

JOURNALIST:

How realistic is it for the government to pull back on its expenditure? A lot of the money would have already been committed.

JOE HOCKEY:

Well the interesting thing is that they have pushed out their BER program to 2012.  So they’re spending half a billion dollars on school halls in 2012 to address one quarter of negative growth in 2008.  That says it all.  Why is the government still spending billions of dollars extra in 2012 when they had one quarter of negative growth in 2008?  It’s absurd and it is clearly political.

The government is going to cling on to these figures and say “well, you know, there was only anaemic levels of growth in the economy”.   External factors have clearly had an impact.  The external factors – imports and exports – had a positive impact back in the March quarter when Australia did not have a second quarter of negative growth.  Now in these National Accounts they had a significant negative impact on growth.  This just clearly illustrates again – the government has monetary and fiscal policy working in different directions but they don’t want to do anything about their expenditure because quite frankly, it’s all political.  And Australians will pay with higher interest rates because this government is drunk on spending.

JOURNALIST:

The US President Barack Obama says they should look at a pink batts program and you might have heard his comments on the radio this morning saying that UIS manufacturers have benefited from Australia’s program?

JOE HOCKEY:

Well this is just a clear illustration that the expenditure by Kevin Rudd has been focused on politics and not good economics.  I’m glad for President Obama that the Australian taxpayers have helped prop up the American economy!  But I would just say to Prime Minister Rudd, put Australia first.  Stop focussing on the rest of the world and start focussing on Australia.

JOURNALIST:

Mr Hockey the Aviation White Paper, Anthony Albanese flagged a relaxing of our foreign ownership in Qantas and allowing maybe up to 49% to be foreign-owned…

JOE HOCKEY:

Well this is something I have previously been on the record about.  Very concerned about any dilution of Australian control of Qantas.  Qantas has, over the years, tried to increase foreign investment in the airline.  We have been very concerned for a number of reasons.  First and foremost, Qantas is an Australian icon and Qantas undertakes significant tasks in the national interest and there have been numerous examples where Qantas – an Australian-owned airline and an airline that relies heavily on government regulation has undertaken tasks in the national interest.  Our experience has been that when companies have majority foreign ownership or majority foreign control –not necessarily the same thing – but when they have majority foreign control, then it actually has an impact on the social responsibilities of those companies here in Australia. So, in short, we’ll see where we’re going.

JOURNALIST:

Back to the stimulus, how much should it be cut?

JOE HOCKEY:

Government expenditure should be cut so that there is no unnecessary upward pressure on interest rates.  I would urge Wayne Swan to sit down with the Governor of the Reserve Bank and work out how the two organisations – the government and the Reserve Bank – can put Australia’s interests first rather than Kevin Rudd and Wayne Swan focussing on their political interests first.

When you look at these figures and you look at the claims of Wayne Swan in his recent press conference, you’d say to yourself “well, why did interest rates… why was there an increase in the cash rate every month for the last three months?”.  Well it is patently obvious that the government’s expenditure is putting upward pressure on interest rates.

JOURNALIST:

[inaudible]

JOE HOCKEY:

Well we never opposed total fiscal stimulus, we said it was too big.  It was just too much and it was poorly directed.  The evidence is President Obama’s statement on pink batts.  If you need any better evidence than the President of the United States well then you’re in Disneyland.  That’s great evidence to prove what we said; that it was poorly targeted – it’s now stretching out to 2012 – and now the clear evidence is that it is putting upward pressure on interest rates.

[inaudible]

Half a billion on the BER.

Thanks guys – Merry Christmas.