Transcripts

DOORSTOP INTERVIEW SYDNEY TUESDAY 2 MARCH, 2010

2nd March 2010

 DOORSTOP INTERVIEW 

SYDNEY

TUESDAY 2 MARCH, 2010

 

 

E&OE………………………………………………………………………………………

 

Subject: RBA decision to increase the cash rate, Rudd government spending putting upward pressure on interest rates, John Howard’s appointment to the ICC

 

 

JOE HOCKEY:

 

Today the Reserve Bank increased interest rates yet again. The government has outsourced the heavy-lifting in the economy to the Reserve Bank and every homeowner is feeling the pain.

 

Because the government is failing to pull back on its massive spending, the Reserve Bank is increasing interest rates faster. The Reserve Bank is increasing interest rates faster and higher than any other comparable country in the world and they are doing that because the government is refusing to pull back from recession-level spending at a time when clearly the Australian economy is near trend growth.

 

This is a key point - the Reserve Bank has increased interest rates now by a full one percent, yet the banks themselves have increased interest rates for homeowners by more than one percent. In fact, for the average homeowner with the average mortgage of around $300,000, interest rates have gone up by $3,000 a year in the last few months and even more because the banks themselves have increased interest rates.

 

Now if the government does not pull back on its massive and wasteful spending -  on programs like the pink batt program, on a range of other programs - if the government does not pull back on spending, interest rates will go higher.

 

Kevin Rudd is responsible for this interest rate increase. Kevin Rudd is responsible for the pain that Australian families are going to have to go through now that they are paying more than $3,000 a year more in interest following this latest rise from the Reserve Bank.

I want to issue a warning to the government on two fronts: firstly the Reserve Bank has confirmed today that the Australian economy is nearing trend growth. Of course by the government’s own policy statements, when the economy gets to trend growth a two percent cap in real terms on spending kicks in. This government needs to start pulling back if it’s going to meet its own restrictions on spending.

 

And secondly, when Kevin Rudd unveils his health plan tomorrow he needs to explain to the Australian people immediately where the money’s coming from. He can’t pretend that that two percent cap is not going to kick in next year. The Reserve Bank has already flagged that it is going to have to kick in next year when the economy goes to trend.

 

Kevin Rudd is being boxed in by his own policy failures. His policy failure on running large deficits is contributing to upward pressure on interest rates. His policy of a two percent cap in real terms means that he cannot deliver any massive new injection of money into the health system without misleading the Australian people.

 

It is a fact that the banks are passing on higher interest rates than even the Reserve has foreshadowed with the latest rise and that is going to hit Australian homeowners and Australian credit card holders right between the eyes.

 

JOURNALIST:

 

The Prime Minister’s apologised for pretty much everything last week. Should he apologise to home owners as well?

 

JOE HOCKEY:

 

Well Kevin Rudd should apologise for his reckless and wasteful spending which is putting upward pressure on interest rates.

 

The Governor of the Reserve Bank has said on two occasions now that there is a direct link between government spending - excessive government spending - and higher interest rates.

The IMF has backed him up on that. Even Kevin Rudd in 2008 said if you want to reduce the upward pressure on interest rates, then tighten government spending.

 

The fact of the matter is that this government has refused to pull back on spending programs. Even the pink batt program is going to have a Mark 2 form because the government is so committed to spending so much money. The sad thing is it’s wasteful, it’s reckless.

 

If the government can’t get the spending right on pink batts, how can you trust them with a massive amount of spending on the health system? How can you trust them with a massive amount of spending on education? How can you trust them with a massive amount of spending that all comes out of the taxpayers’ pocket?

 

JOURNALIST:

 

The Reserve Bank has said that as the economy strengthens, interest rate rises are inevitable. Isn’t this just a sign that the economy is going well?

 

JOE HOCKEY:

 

The economy has been going well for a long period of time. The Reserve Bank has also said this is one of the mildest downturns since World War II. The fact of the matter is there are a number of factors. 

 

I reiterate those: number one, we had no banking failure in Australia. As the Governor of the Reserve Bank said, this has been a North Atlantic financial crisis, not a global financial crisis.

 

Secondly, Australia had interest rates cut more dramatically than almost any other country and because people have variable home loans it flowed through quicker.

 

Thirdly, with our floating dollar, we were massive beneficiaries of the surge of spending particularly out of China.

 

And of course the stimulus had some impact, but for those people that received $900 cheques, you’re now paying $3000 a year more in interest.

 

Ask yourself whether it was a good deal for your family.

 

JOURNALIST:

 

You’ve been calling for the stimulus package to be wound back for some time now. If the government had followed your advice in the first place, wouldn’t we be in far worse shape?

 

JOE HOCKEY:

 

Absolutely not. If the government had followed our advice and reduced its stimulus package by $20-25 billion then the Australian economy would be performing as well as it is today but certainly without the pain of faster and higher growth in interest rates, and certainly without the debt legacy that this government is going to leave.

 

Understand this - the government is still spending money in 2012 to deal with a downturn in 2008.  Ask yourself as an Australian whether it’s a good idea to spend half a billion dollars on school halls in 2012 when every dollar the government spends at the moment continues to put upward pressure on interest rates.

 

I feel terribly sorry for those Australians with home loans, credit cards - everything that is linked to a variable interest rate because the government is refusing to pull back on its wasteful spending and that’s putting further upward pressure on interest rates, which is going to have a huge impact on the cost of living for everyday Australians.

 

JOURNALIST:

 

But aren’t interest rate increases just inevitable?

 

JOE HOCKEY:

 

No, and I say that because Australian interest rates are now rising higher and faster than any other comparable country in the world and the best way to take away some of the pressure on that rapidly-rising cash rate is for the government to pull back on spending.

If the government pulls back on spending then it will have an impact on interest rates. It will take some of the pressure off interest rates.

 

This government doesn’t know how to be a responsible fiscal manager. They’ve had blow-outs on Medicare. They’ve had blow-outs on the PBS. They’ve had blow-outs on the Education Revolution school program. They’ve had blow-outs on the computer program. They’ve had blow-outs on the solar panels program. They’ve had blow-outs on consultants.

 

There is absolutely no area of major expenditure by the Rudd government that has not seen a massive blow-out in expenditure and a failure to produce the intended results.

 

Australians are going to pay a very high price for the reckless spending of the Rudd government and today is a further taste of the pain that Australians are going to have to accept.

 

JOURNALIST:

 

The Reserve Bank statement mentioned that some other countries are rolling back their stimulus now that the global economy is recovering. How do you read that?

 

JOE HOCKEY:

 

Of course they are.  Of course they’re pulling back their stimulus measures and their interest rates are far lower than those of Australia.  Now in part, that’s because Australia didn’t go to the depths of many other countries. But if it was good enough for Kevin Rudd in 2008 to say that controlling government spending means you take the pressure off interest rates and [inaudible] to say to the Australian people that he would be a fiscal conservative, he’s nothing of the sort.

 

He gave a commitment to the Australian people that he would fix up the hospital system by the middle of last year otherwise he would take over the hospitals. He’s doing nothing of the sort.

 

I think Australians are starting to realise that Kevin Rudd is not true to his word and it’s no use apologising if you don’t mean it. It’s no use offering an apology to the Australian people if you really don’t mean it. It ends up being a political ruse and the Australian people see through it.

 

JOURNALIST:

 

[inaudible]

 

JOE HOCKEY:

 

Well I am very, very happy for John Howard. Firstly it’s great to see an Australian takeover such a senior position at the ICC. It’s also great to see such a prominent Australian and such a tragic lover of cricket receive the opportunity to have a hand in the future destiny of cricket.

 

It’s good for Australia - no, it’s great for Australia - and it’s great for cricket and I think it’s just a wonderful recognition that John Howard is an extremely capable person.

It also is a message to the world that you’re not finished when you’re in your late 60s.  You actually can still make a significant contribution to the world and to a great sport. No one doubts John Howard’s love of cricket and therefore we’re all winners out of this great victory.

 

I am only sorry that there were reports that the Rudd government was trying to put pressure on Cricket Australia to pull back on John Howard’s nomination. If that’s the case, if that’s true - and there were reports to that effect - if that is true, then it says a lot about the Rudd government.

 

JOURNALIST:

 

Mr Hockey, the Federal government has accused the Opposition of being overly negative on issues like the national curriculum and the health reforms. Do you think the Opposition is risking being seen as being negative for the sake of it?

 

JOE HOCKEY:

 

Well I would say this, we are a constructive Opposition. We have offered solutions in relation to, for example, hospitals having local boards in New South Wales and Queensland. Kevin Rudd is so opposed to the idea that he’s reportedly going to accept it. Now, if we’re an Opposition for opposition’s sake, why is it that Kevin Rudd is stealing our ideas?

 

One idea I do want him to steal is to pull back on government spending because if he steals that idea, I’ll be happy and so will all those people in Australia that are facing higher interest rates on their mortgages.

 

Thanks very much.

 

 [ends]