Hockey eager to cast off his shadow
Federal treasurer-in-waiting Joe Hockey stepped onto the stage at Bloomberg's Australia Economic Summit on Wednesday with a degree of confidence befitting a man who was pretty sure the word "shadow" would soon by dropped from his work title.
He was addressing a room full of business and finance types who were listening to his views on everything from regulation to superannuation and currency wars with new eagerness.
The slimmed down Hockey was relaxed but clearly cautious and quipped before the event that he was not sure how much he was prepared to give away to the interviewer looking for fresh material.
In a policy sense, Hockey was reticent.
The Coalition does not need to win the September election; it just needs to ensure it does not lose it. So there was little point in Hockey giving away too much.
But his free-market views and concerns about the behaviour of interventionist governments engaging in quantitative easing were a clear theme.
To the extent Australia's manufacturing industry was in crisis, Hockey made the controversial suggestion that the high dollar was not the primary cause.
He said businesses did not respond quickly to movements in the dollar, reminding the audience that when the dollar was below 50¢ there was no rush to move manufacturing to Australia.
He proffered his anecdotal experience of a dinner party with a businessman who explained that the problem for Australian business was that its costs were too high. His dinner companion argued that the lower costs of labour and energy in the US were reviving the American manufacturing sector.
There was plenty of opportunity for global manufacturing companies to move operations to cheaper locations, China being an example.
Hockey took the view that Australia was pricing itself out of the market and many would agree.
The topic of manufacturing is smoking hot this week following Holden's decision to sack 500 people and reduce production despite generous government subsidies.
It is just one of the many companies that have blamed the high Australian dollar for their woes. To deny the currency fallout is a big call.
But Hockey did not agree that the quantitative easing being used by many of Australia's trading partners, which was supporting their currencies and trading terms, meant they were supporting growth. This was a response to the fact they had been living beyond their means and had in turn distorted trade and commerce, he said.
He showed his free-market colours by advocating a policy of no intervention as opposed to using the Reserve Bank to manipulate the currency. He said he would rather see Australian companies use the strong currency to their advantage by buying offshore assets.
Under his stewardship, Hockey will aim to introduce longer dated government bonds - up to 40 or 50 years - so the country can start to develop an annuity market.
While this will open the door to long-term investments, extending the yield curve can offer the private sector hedging opportunities.
Hockey did not agree that superannuation funds should be directed by the government into infrastructure.
He believed markets rather than governments should be asset allocators.
He supported the development of the corporate bond market.
On the vital question of whether, or when, the Coalition would take the budget back into surplus, Hockey was evasive.
He said considering the opposition had not seen the nation's books, it had no ability to predict the time needed to get rid of the deficit.
The restoration of a surplus was what the Reserve Bank needed in order to take the currency in hand he said, adding that Australia would be exposing the economy to international volatility by importing offshore money.