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.
