My ten questions for Mr Hockey ahead of Q&A

Sun, 18 May 2014  |  

It will be terrific viewing tomorrow night when Treasurer Joe Hockey appears on ABC TV's Q&A programme. It is an opportunity for the Treasurer to outline his economic strategy and the issues that he was dealing with as he framed the first budget of the Abbott government.

It is to be hoped that the questions and discussion move away from the lame rhetoric and platitudes that have come to dominate the economic and policy discussion in recent years.

On that score, here are 10 questions that I would like to hear Mr Hockey asked tomorrow night (or on any occasion for that matter).

1. How concerned is Mr Hockey that he has framed a budget that will see the unemployment rate rise over the next two years, with the rate of economic growth slowing into 2014-15? Why is he happy to bring down a budget with these unsatisfactory economic parameters?

2. Mr Hockey thinks government debt is too high. This means that he must have a view of the level of debt that is "just right". What is the optimal level for gross debt – is it zero - and linked to that, what is the government's target for gross government debt?

3. Why is the government relying on a higher tax to GDP ratio to lower the budget deficit while keeping spending above the average of the final three budgets Labor? (ie, the post GFC stimulus normalisation of fiscal policy)

4. Mr Hockey notes, quite correctly, that price signals work when is comes to demand for particular products. To that end, the GP co-payment is designed to reduce GP visits. Why then was the price on carbon flawed, given it can already be observed that per capita usage of electricity has fallen, while the proportion of electricity produced by renewables has increased as these price signals work their way through the economy?

5. It is a similar issue with university entrance. Can Mr Hockey release the Treasury estimates of the reduction in the number university students that will result from higher fees, a lower HECS payback threshold and a higher interest rate on HECS debt as outlined in the budget?

6. Mr Hockey has noted headwinds from the global economy. If these turn into a genuine handbrake on Australian economic growth via falls in the terms of trade and weaker exports, what policy response would he implement?

7. Related to that, has Treasury shown Mr Hockey the results of its most recent 'war gaming' of the policy response to a negative global economic shock? If not why not? If so, what does Treasury recommend as an appropriate policy response in the event of a negative shock?

8. Mr Hockey is obviously very concerned about public sector gross debt. Given that household debt is some four to five times larger than government, does he think households should start to hunker down, limit their spending where possible and reduce their debt levels? 

9. The Medical Research Future Fund appears to be a very high risk investment for the government to undertake – probably more risky than allocating money to the car or airline industries. If after pumping $20 billion of tax payers money into the Medical Fund it has not made any significant advances in medicine, which seems more likely than not, what will happen to the Fund?

10. Does Mr Hockey think the cost of around $600 million a year to run the Future Fund is fair? Will the government pressure it to lower its cost base, thereby delivering a greater return to taxpayers?

There are many more questions that could easily be directed at Mr Hockey but for now, I hope he is asked these questions tomorrow night and in the weeks ahead.

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The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

Tue, 07 Jan 2020

This article first appeared on the Yahoo Finance web site at this link:   


The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

For many people, the cost of the fires is immeasurable. 

Or irrelevant. 

They have lost loved ones, precious possessions, businesses and dreams and for these people, what lies ahead is bleak.

Life has changed forever.

As the fires continue to ravage through huge tracts of land, destroying yet more houses, more property, incinerating livestock herds, hundreds of millions of wildlife, birds and burning millions of hectares of forests, it is important to think about the plans for what lies ahead.

The rebuilding task will be huge.

Several thousands of houses, commercial buildings and infrastructure will require billions of dollars and thousands of workers to rebuild. Then there are the furniture and fittings for these buildings – carpets, fridges, washing machines, clothes, lounges, dining tables, TVs and the like will be purchased to restock.

Then there are the thousands of cars and other machinery and equipment that will need to be replaced. 

What's ahead for the Australian economy and markets in 2020

Thu, 02 Jan 2020

What's ahead for the Australian economy and markets in 2020

Happy New Year!

2020 will be a year where Australia’s annual GDP will exceed $2 trillion, our population will get very close to 26 million people and we will clock up 29 years with no recession.

It is also a year where the economy will be a dominant issue for policy makers, will drive what happens to interest rates, will help drive investment returns and will feed into the well-being of the Australian community. 

2020 kicks off with relatively good news in terms of economic growth, even though the labour market is likely to remain weak, with wages growth struggling to lift and inflation remaining below the RBA’s 2 to 3 per cent target. The Reserve Bank may have one more interest rate cut in its kit bag, but by year end, the market is likely to price in interest rate increases, albeit modestly.

The ASX, which had a great 2019 is set to be flatten out, in part driven by the change in the interest rate outlook, but it should get a boost from better news on housing and household spending.

In terms of the specifics, I have broken down the 2020 outlook into a range of categories and given a broad explanation on the issues underpinning the themes outlined.

GDP Growth

It’s a positive outlook. A pick-up in GDP growth from the current 1.7 per cent annual rate is unfolding, with the only real issue is the extent of the acceleration.