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 be dropped.
He was confronting a room of business and finance types who were listening with new eagerness to his views on everything from regulation and superannuation to currency wars.
The slimmed-down Joe 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 government does not need to win the September election, it just needs to ensure it does not lose it. So there was little point in him giving away too much.
But his free-market views and his concerns about the behaviour of interventionist governments engaging in quantitative easing were clear themes.
To the extent that manufacturing industry in Australia is in crisis, Hockey made the controversial suggestion that the high dollar is not the primary cause.
He said businesses did not respond quickly to movements in the dollar - 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 their costs were too high.
His dinner companion mounted the argument that the lower cost of labour and energy in the US was reviving its manufacturing.
There is plenty of mobility for global manufacturers that will move operations to somewhere cheaper, and even China has been a victim of this.
Hockey takes the view that Australia is pricing itself out of the market, and many would agree.
The topic of Australian 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 many companies blaming the high dollar for their woes. To deny the currency fallout is a big call.
But Hockey does not agree that the quantitative easing being used by many of Australia's trading partners - which is supporting their currencies and trading terms - means they are supporting growth.
This is a response to the fact they have been living beyond their means, according to Hockey, and has in turn distorted trade and commerce.
Rather than using the Reserve Bank to manipulate the currency, again Hockey shows his free-market colours. No intervention.
Instead, he would rather see Australian companies use the strong currency to their advantage to buy offshore assets.
Under his stewardship, Hockey will try to introduce longer-dated government bonds - up to 50 years - so the country can start to develop an annuity market. This opens the door to longer-term investments, and extending the yield curve can offer the private sector hedging opportunities.
Hockey does not agree that super funds should be directed by government into infrastructure because he believes markets rather than governments should be asset allocators.
He supports the development of the corporate bond market.
On the vital question of if, or when, the Coalition would take the budget back into surplus, Hockey was evasive, again saying that if the opposition has not seen the nation's books it has no ability to predict the time needed to get rid of the deficit.
The restoration of a surplus is what the Reserve Bank needs to take the currency in hand. By importing money from offshore, we expose our economy to international volatility.