8 March 2015
Transcript - #2015049, 2015

Interview with Peter Van Onselen and Paul Kelly, Australian Agenda, Sky

PETER VAN ONSELEN:

We are joined by the Treasurer, Joe Hockey. Thanks for your company. 

TREASURER:

Great to be here.  

PETER VAN ONSELEN:

You always sound so sarcastic when you say that.

TREASURER:

No, no I am genuine.

PETER VAN ONSELEN:

Let's start with exactly what Paul was just talking about, he wrote about it yesterday in The Australian as well. It feels like a contradiction to some extent. On the one hand, the Government retreating, for political reasons as well as blockages in the Senate, on things line the co-payment or the Defence Force pay issue. Yet this startling report about the fiscal road forward, how do you bring those two together? 

TREASURER:

The starting point, Peter, is that if we want to stay the same, if we want to have the same quality of life we have to change. We are endeavouring to lay down a road map of the challenges that lie before The Australian people over the next 40 years. It seems like a long time but I visited a childcare centre in Brisbane yesterday and those children in the childcare centre are going to be younger than me when this challenge is at its very worst. 

What we are saying is, ‘okay, if these are the challenges and the numbers are the numbers, whether it is the Labor Party or ourselves in government, how are we going to deal with those challenges now?’ The decisions, the incremental decisions you make now can reshape the future. 

PETER VAN ONSELEN:

That is my point, you are going in the opposite direction with things like the backflip on the co-payment, possible changes to the pension, the ADF pay situation. 

TREASURER:

You see I don't accept that because, for example, the Medicare co-payment – we said always it was about having a price signal on Medicare. Medicare is one of the largest – fastest growing costs over the next 40 years but, in particular, now the Medicare co-payment represented one 17th of one per cent of expenditure. So it is not, in terms of total Budget revenue, a big issue but it is a significant policy issue. What we have said is we want to work with the medical profession to identify appropriate price signals for those that can afford to pay so that those that cannot afford to pay can be guaranteed proper healthcare in the future.  

PETER VAN ONSELEN:

But presumably if the situation fiscally is as dire as the Intergenerational Report stipulates, the Budget, that is only a matter of months away, will start at the process of looking at some further long-term changes. 

TREASURER:

It is an incremental process. Last year, as is clear from the Intergenerational Report, we tried to deliver a Budget – one Budget that solved 40 years of looming problems.  That was too much.  We accept that.  But now the pressure is on the Labor Party, the Greens and the Independents who control the Senate to start being fair dinkum about Australia's future. Mr Shorten says that he will come out with a plan in the next two years before the election. Two years is too far away.  Because his actions right now are changing the destiny of the nation. His decisions right now, having the largest voting-bloc in the Senate outside of our [inaudible], change the destiny of the nation now.  So Mr Shorten has to lay down a plan now as an alternative. 

PETER VAN ONSELEN:

But just on that, do you concede – strikes me as a truism – do you concede that if it weren't for the upper house and its capacity to block all these things that the government is now saying is the right thing to backflip on like the co-payment, they would actually be law, they would be law right now if you got your way. 

TREASURER:

There [inaudible] other things. We had to take steps in last year's budget to fix the mess that we inherited.  There were controversial issues, and the Deficit Reduction Levy was controversial.  But because it went through it has hardly rated a mention ever since because everyone knew that that was one of the measures…

PETER VAN ONSELEN:

Is that what you think would have happened with the Medicare co-payment? If it had gone through it wouldn't have been a political time bomb for you? 

TREASURER:

We will never know. But the bottom line is if we do not pay our way now, if we do not live within our means now, then the future is going to be far tougher for ourselves and our children. From our perspective, what we want is for the future to be better. Now, what the Intergenerational Report does show is that Australians are going to live longer and they are going to be wealthier. That's fantastic. And we are going to have a better quality of life than our parents or our grandparents, and that's fantastic as well.  But we can't guarantee that our children will have a better quality of life. So, what we've got to do is undertake to measures now that are necessary to strengthen the economy and strengthen the Budget. 

PAUL KELLY:

You have just conceded that the 2014 Budget tried to do too much. But can I ask you, are you still committed to the quantum of savings in that 2014 Budget to be obtained over the next few years? 

TREASURER:

Absolutely. Paul, there is no choice.  Whether it is ourselves, or our political opponents, whoever's in government. The status quo is not an option. And why?  Because even the most generous cursory look at government spending over the next 40 years and the government bottom line over the next [inaudible] years, assumes that we are going to have another 40 years of economic growth.  It assumes no recession for the next 40 years. Now, Australia has had, apart from Japan after World War II, Australia has had the second longest period of growth – continuous economic growth, in modern developed world history. The Netherlands is the only one that went a bit longer based on North Sea oil – 26.5 years.  We're at 24. We're assuming that we are going to have 64 years of continuous economic growth, and even then, unless all of our savings are passed, the Budget never gets anywhere near back to living within its means. 

PAUL KELLY:

So in other words, what you're arguing is it is wrong to think that this report is too pessimistic. You are actually saying there are a lot of optimistic assumptions in the document. 

TREASURER:

There are some optimistic assumptions. The most robust – inevitably when you look forward 40 years there is going to be changes, but the one thing you can really count on is that we are all going to live longer. And that's terrific. The question is, what sort of quality of life are we going to have as we live longer? 

PAUL KELLY:

Okay, let's just then go back to the Budget and, in particular, talk about the coming May Budget, the 2015 Budget. There have been different signals sent about this Budget. From time to time both yourself and Tony Abbott have indicated there won't be major new structural savings in this coming 2015 Budget. Is that the situation or not? 

TREASURER:

What we are doing is we are trying to get more bang for our buck out of this Budget. Clearly, the economy is not as strong as we would like it to be. So, every dollar we spend needs to be a dollar that gets more bang in the economy. That is why we are announcing an upcoming families childcare package, which is about workforce participation, which is something we identified in the Intergenerational Report as a huge issue, particularly for mums. The second area is small business. As we identify in the Intergenerational Report, small business is going to be the biggest driver of job growth over the next 40 years.  Disruptive technologies are completely turning the usual business paradigms on their heads. So, we are focusing on small business, we are focusing on workforce participation and, on top of that, we have got an ongoing rollout of the biggest modern infrastructure program in Australia's history. 

PAUL KELLY:

Okay, so from what you have just said the focus in the Budget is going to be growth. What about savings? Will there be new structural savings or not?  Given this document, which is arguing the need for savings, will there be new structural savings in the Budget or not or are they sacrificed to the imperative of growth? 

TREASURER:

No, we are not sacrificing savings, but we can only get through the Senate what we can negotiate.  Now, this is why it is absolutely essential that the parties in the Senate come to the table and negotiate with us the savings that are necessary to fix the Budget. Now, we have laid down a plan, we are not going to retreat on the plan and offer another plan that is just rejected by the Senate.  All that does is create enormous uncertainty and instability and also at the same time it just allows our political opponents a get out of jail free card. 

PETER VAN ONSELEN:

The founding fathers gave you a mechanism to be able to deal with an obstruction in the Senate. We haven't seen it in nearly 30 years used in this country. Why not if it is that imperative? 

TREASURER:

There are already pieces of legislation that have been rejected twice by the Senate. 

PAUL KELLY:

Okay, but I think this is a really relevant point.  If you are standing by the Budget measures that can't get through the Senate, will you run them on to a double disillusion list? 

TREASURER:

Well, that is not for me to call.  But it is clearly unacceptable to have only one side of politics offering a plan for Australia's future and the other side of politics just saying ‘no’ to everything, and as a result they are not contributing to the policy that the - we can frame policies. When we framed the last Budget and we identified that we needed to have an inflation index on fuel, who would have thought that the Greens would be voting against increasing the tax on fuel?  Who would have thought that? Who would have thought before the last Budget that the Labor Party would vote against savings and tax changes that they themselves promised when they were in government?  Who would think that? So, they're completely irrational. 

PETER VAN ONSELEN:

Their arguments were that the changes to higher education were in the context of increased funding through Gonski in the out years [inaudible]

TREASURER:

They are actually wrong, and Chris Bowen, as he has been around this desk on numerous occasions, has got it wrong. He got it wrong again. In fact, the saving in relation to R&D with changes on the tax rate for the 25 largest companies in Australia with a turnover of in excess of $25 billion, that was unrelated, that was a Budget fix according to Wayne Swan when he announced it, and then the Labor Party went into opposition, redefined it and opposed it. As in the Labor Party was actually trying to prevent tax changes that would have got more tax out of the 25 largest companies in Australia. 

PAUL KELLY:

Ok, sure, if we can just go back to the Government's measures though. Now, the Government has backed down on some of the measures such as the Medicare co-payment. Let's look at indexation of pensions. The Budget proposes to change the indexation arrangement to an inflation-based one, which, over a period of time, would erode the value of the pension. Is the Government committed to a sunset clause on this to ensure that this new arrangement, if it is legislated, only lasts for a certain number of years? 

TREASURER:

Well, we did and I tell you why, because in the Mid-Year Economic and Fiscal Outlook, which understandably was drowned out by the terrible events at Martin Place, I have flagged that we would, when we get back to surplus, when we get the Budget back in order, we can be more generous to those people receiving a pension.  In relation to the age pensions, don't forget – and this is over a long period of time – you are seeing people with superannuation come into the retirement system and that superannuation does get significant tax benefits.  So, as the pool of superannuation increases, you would expect the reliance on the age pension would decrease. So, what we want is for the age pension to be more targeted more generously to those most in need. 

PAUL KELLY:

I understand that. It just seems to me to be somewhat strange. It's surely an anomaly of sorts to be saying; we'll change the indexation arrangements for a while and when we get back to surplus we'll go back to where we were.’

TREASURER:

Well no, because by that stage you'll have, because of the superannuation savings of retirees coming into play, you will have, you would hope, fewer people…

PETER VAN ONSELEN:

You would also have a much larger aged population. 

TREASURER:

Well, that's right. But as a percentage of the aged population you will have fewer people, you would hope, in need of the age pension.  But that allows you to have a more generous age pension. What Labor wants is the best of all worlds. They want to have significant tax incentives for superannuation, build the pool of superannuation and build the base and the pool of people on the age pension and, of course, with the demographic changes you are going to see a larger and larger number of Australians my age in particular, my age in particular –not older Australians now, my age in particular – that are going to have a pool of superannuation, entitlement to the age pension and fewer traditional working age people to pay the bills. 

PAUL KELLY:

Sure, but you have got this measure to change the pension arrangements. It is opposed by the Labor Party and the Greens, so it is very hard to imagine how you will get this through the Senate.  Is this the sort of thing that you are prepared to fight for in an election context?  Will you take this to an election? 

TREASURER:

Paul, the election is still scheduled to be more than a year away. I am not going to try and run an election campaign now. I'm trying to do what we need to do now. 

PAUL KELLY:

Let me ask the question another way: will the Government stand by this measure? 

TREASURER:

We are prepared to negotiate. I can't emphasise that enough.  I have walked around to Labor Party offices and said ‘Come on guys.’ I've walked into their offices and said, ‘You're going to have to deal with these issues as we are trying to deal with these issues.  What are you proposing? Just tell us, what do you think is the solution is and we are prepared to negotiate?’  But they just say, ‘Sorry, sorry, the politics of the day is just such that’…

PAUL KELLY:

On this issue they are not prepared to change their position, are they? 

TREASURER:

Well, you know I live in hope. I live in hope. I hope it's not false hope, but I live in hope. Because if the Labor Party and the Greens excuse themselves from the national debate about Australia's future, then we're all going pay a price.

PETER VAN ONSELEN:

We are going to have to take a break in a moment, but just before we do I just wanted to clarify, is it correct that the Government's mea culpa about things like the Medicare co-payment and the Defence Force pay, that is really just a consequence of not being able to get your way in the Senate.  It is not a consequence of necessarily thinking it's wrong?

TREASURER:

No, obviously we have consulted with people, obviously, and that's appropriate.  Governments from time to time have errors of judgment; they misread community views or stakeholder views and make changes accordingly. Now, you would hope that is the case. 

PETER VAN ONSELEN:

But given that, given the error of judgment, is the Government glad that you have got a bicameral system with a Senate that gets in the road?

TREASURER:

You are asking the wrong person, Peter. 

PETER VAN ONSELEN:

Otherwise, dare I say Queensland-style with a unicameral system you would have legislated all these things and we saw how that ended. 

TREASURER:

Whether it is bicameral or unicameral, or whatever the case might be – benevolent dictatorship, you've got to do what is right for the country.

PETER VAN ONSELEN:

That is my question though, if it is right for the country did the Senate just get in the road of that or did the Senate save the Government from itself?

TREASURER:

I will leave it to you, you're the commentator. 

PETER VAN ONSELEN:

Alright, we are going to take a break, you are watching Australian Agenda. We are talking to the Treasurer, Joe Hockey, we will continue do so when we come back. 

**AD BREAK**

PETER VAN ONSELEN:

We are speaking to the Treasurer, Joe Hockey. We have to talk about tax and a whole range of other things around the White Paper process to come. But just before then, spending – getting spending under control is obviously a key mantra of the Government; it is often talked about. Your last Budget projected spending of $410 billion, then $412, then - this is per financial year - then $424, $443, $467 billion in 2017-18.  Do you now look, almost a year on from then, like you are going to hold to those numbers? 

TREASURER:

What we inherited were locked in expenditures over a period of time, which particularly grew in the last year of the four-year forward estimates because our predecessors had all these spending commitments that kicked in, such as Gonski or hospitals or the NDIS, which may be laudable, putting aside the merits of them, the spending commitments really kicked in outside of the numbers that they presented in the last election. So, what we've had to do is properly address those issues.  Now, we got spending down from around 3.7 per cent growth in real terms per annum, over the medium-term we got it down to around 2.7 per cent, but that is still too high. 

PETER VAN ONSELEN:

But you get a mud map as Treasurer each week of where it's all at. These were the projections in the last Budget. I understand obviously the commodity prices and so forth have created problems on the revenue side, but on the spending side are you sticking to your projections? 

TREASURER:

There are always going to be some variations. Childcare spending has been much greater than anyone would have expected more than a year ago for various reasons. Also, you obviously have, sadly, terrorist events, military commitments and so which changes the nature of spending but overall our spending trajectory is on track. 

PAUL KELLY:

The Intergenerational Report makes it pretty clear that the pathway back to a surplus is going to be substantially achieved on the taxation side with people moving into higher-income tax brackets through the technique of bracket creep. And it assumes no relief there until 2021 – the year 2021. Surely that is not tenable?

TREASURER:

[Inaudible]

PAUL KELLY:

You agree that is not tenable? 

TREASURER:

Average wages are over $77,000 a year now.  The second highest tax bracket is $80,000 – people start paying 37 cents plus the Medicare levy. Once you start to have more and more people on that second highest tax bracket it actually starts to slow the economy, which, in turn, means that you get less revenue.  So, this is the balancing act.  We can't surf back to surplus on increasing taxes, because even the highest level of revenue collection – which occurred in 1986 – the highest level of revenue collection ever goes nowhere near, nowhere near, covering the locked-in expenditure that has been put in place by the previous Labor government. 

PAUL KELLY:

Yeah, but in terms of these marginal tax rates, is it your objective to try and return some bracket creep to give tax cuts well and truly before 2021? 

TREASURER:

Well, so much depends on what we can achieve in our negotiations with the Labor Party and the Greens in the Senate about saving money. You can't deliver tax cuts if you are still in a significant structural…

PAUL KELLY:

But as Treasurer, how much is this your aspiration? 

TREASURER:

I want to reduce taxes, because you never tax your way to prosperity, Paul. As a country you can never tax your way to prosperity. What we want is to give money back to families, give money back to small businesses, give money back to everyday Australians so that they can control their money. It's their money; it's not my money. 

PAUL KELLY:

But you're saying in terms of the current Budget structure, you don't have the leeway to do that? 

TREASURER:

We don't. At the moment, we do not have the leeway for those tax cuts, those significant tax cuts.  That’s all the more reason why we need to reduce the expenditure trajectory. 

PAUL KELLY:

But this goes to the heart of another debate, and that is how we make the adjustment? Are we going to make the adjustment on the spending side or the taxing side? 

TREASURER:

Taxation legislation is going to be under ever increasing pressure over the next few decades. The world is changing remarkably and whilst you would have easily have assumed ten, 15 years ago that, for example, the GST is going to be an enduring tax, and it has given the states a lot of revenue, with global trade, with the development of internet commerce, with not just the transaction of the sale of goods over the internet but increasingly services, there are going to be more and more goods and services that are provided from offshore under free-trade agreements that are going to miss that net. 

PAUL KELLY:

Well, what do we do then in relation to the GST? 

TREASURER:

We will release a discussion paper in April about tax… 

PAUL KELLY:

What's your personal view? 

TREASURER:

That's a dangerous question to a Treasurer. 

PAUL KELLY:

No, it is a very pertinent question to a Treasurer. 

TREASURER:

My view is you would have to question whether in 30 or 40 years' time taxes like the GST or company tax will be around. 

PETER VAN ONSELEN:

How do you mean? 

TREASURER:

Well, because capital is more mobile than ever before. Companies are no longer particularly wedded to individual countries, they will move around the world. There is intense competition between jurisdictions. I mean forget the fact there are some jurisdictions, which we are cracking down on through our work on the G20, we led it in cracking down on countries that provide tax havens but there is still intense competition in relation to tax rates from the UK, New Zealand, Singapore, Hong Kong and others to Australia. 

PETER VAN ONSELEN:

See, it is a really interesting question, what do we do then? I mean if for various reasons as you are discussing things like the GST, consumption tax or company taxes can either be legally avoided or simply become null and void because of change, what does a government that needs revenue do? 

TREASURER:

That's the issue. That's what we do need to discuss because ultimately, the influence of government is going to be less into the future than it is today, as the influence of government today on economies is less than it was thirty, 40 years ago. 

PETER VAN ONSELEN:

[Inaudible] We’ve got the NDIS still to come, we've got the increased spending on health and education, it doesn't fit. 

TREASURER:

This is the challenge, this is exactly the challenge that's in the Intergenerational Report, because ultimately governments and the regulated environment, is having less influence on consumers than ever before. I mean consumers are, thankfully, more empowered today than they have ever been in history. The fact that a consumer sitting in Broken Hill can buy something immediately from a supplier in China or in Germany or the United Kingdom and get that service immediately over the internet, or they can send a parcel and get it two days later, it is remarkable – remarkable. 

PAUL KELLY:

If we can just move to another area of the tax debate. There is growing support for cracking down on the superannuation tax concessions.  More and more stakeholders are talking about this, your own Treasury Secretary, John Fraser, raised this in a speech ten days ago. I know that you can't give a detailed view on this, but what is your general view here? Do you think that the Government needs to look at this area, needs to look at raising more revenue from the superannuation concessions? 

TREASURER:

If there is any rorting of any tax, the government has an obligation [inaudible]

PAUL KELLY:

Treasurer, I am not talking about rorting, I am talking about a policy change in relation to this concession? 

TREASURER:

What we did say is that we were not going to change superannuation laws in this term of Government...

PAUL KELLY:

Sure. 

TREASURER:

…now, we are honouring that commitment. 

PAUL KELLY:

Sure. 

TREASURER:

In relation to superannuation, I think that there is a bigger debate to be had.  Because we are living longer, because our work patterns are changing, our life patterns are changing, the old stereotype of study when you're young, work in the middle-ages, retire when you are over 65, that's all being challenged now, and appropriately so, by longevity.  So, there are various points during our lives where we will have a change in behaviour, we'll be retraining, we'll be studying and we'll be looking to have the same quality of life all the way through.  So, I would say to you that we need to have a broader discussion about superannuation, about how it can be used to help us have a decent quality of life throughout our whole lives. 

PAUL KELLY:

Okay, I understand that point you're making and that is a contentious point in its own right. But, I ask again the question about the super tax concessions, because this is now a major focus of debate.  What is your general view on this? 

TREASURER:

I am always prepared to listen, always prepared to listen, but there are people that are running different agendas, and they are entitled to run those agendas. But we are always prepared to carefully consider propositions put forward by various stakeholders. 

PAUL KELLY:

So, you will look at this as Treasurer and assess this? 

TREASURER:

I'm always prepared to listen but, having said that, we honour our commitment not to change superannuation in this term of Government. 

PAUL KELLY:

It seems to me you are going to listen but not look. 

TREASURER:

Always listening and looking.  Paul, you shouldn't be so cynical. 

PETER VAN ONSELEN:

Just going back on the GST.  It sounded like from what you were saying about your expectations decades from now that you don't think that changing the GST is necessarily that important because it's an evaporating tax anyway?

TREASURER:

The starting point is we need the agreement of all the states. 

PETER VAN ONSELEN:

And that's less likely with the changes in Victoria. 

TREASURER:

But even so, Liberal governments – Mike Baird's ruled it out. Liberal governments rule it out from time to time. We need bipartisan agreement. 

PAUL KELLY:

But you're not getting it, you're not getting it. 

TREASURER:

Well therefore, let's change topic. 

PAUL KELLY:

So, in other words, it's off the agenda? 

PETER VAN ONSELEN:

So the GST change is gone? 

TREASURER:

Because if you can't deliver it it’s no used proposing it in this environment, is it? This is why it is so important that our political opponents actually come to the table just to have the policy debate.  They're not even engaging in policy debate.  So, if you're going to put up a proposal that is simply going to hit a brick wall, then why would you go through the angst of putting up any proposal? All we can do is say, ‘This is our plan and we do have a plan to strengthen the Australian economy, to strengthen the Budget. If you don't agree with our plan and you have the capacity to stop us then give us your alternative.’ 

PETER VAN ONSELEN:

I wanted to ask you about debt: business is always saying that it is not afraid of debt, in fact, it sees debt as an opportunity for growth as long as it's the right kind of debt. Interest rates have never been lower.  Australia has got a AAA credit rating, which allows us to borrow more cheaply than we otherwise could. As long as it is good debt that is building productivity in the economy and so forth, is the Government interested in a debt-fuelled recovery? 

TREASURER:

There is a difference between business and government. For a start, debt has tax-deductible status for business and for individuals when it is used for a particular purpose. For government, well, tax deductibility is meaningless. From our perspective, the world is awash in money at the moment because money is being very cheap and governments have printed a lot of money. But sooner or later it will tighten up, there is no doubt about that. Australia imports money from the rest of the world and has done so since 1788 because we are unable to fund our own growth. When the government competes with the private sector in borrowing money, over time that has a negative impact on the Australian economy. That is why we need to get back to surplus to start paying down our debts so the government is not competing with the private sector for that borrowed money.  Having said that, we are continuing now to borrow $100 million a day just to pay our bills – just to pay our day-to-day bills, we are borrowing $100 million a day. That is unsustainable. You can't keep borrowing money to pay your day-to-day bills. That excludes anything that we are building.  So, we need to reduce our day-to-day expenditure and then we have options. But in terms of other borrowings, we are borrowing to fund the National Broadband Network that was left by Labor. So, we are borrowing to fund capital works. But what we have been endeavouring to do is to recycle our assets, recycle our capital. That is why we sold Medicare Private, took the proceeds and we have said to the states, if you recycle assets in order to build new infrastructure to strengthen your economy we will give you that money ‘[inaudible].

PAUL KELLY:

Just on this question then of asset recycling, how important is the NSW election as a test case both for economic reform and for asset recycling? 

TREASURER:

Absolutely crucial. Absolutely crucial.  Look no further than what's happened in Victoria where the new Labor government has ripped up 7,000 jobs on the East West. Unbelievably, they are about to spend the same amount compensating the builders for tearing up contracts on a major infrastructure project, as they would have spent to get the project itself. In the interim 7,000 jobs have gone. In Queensland, which has just lost 15,000 coal jobs and resource-related jobs over the last 18 months, now a new government has come in and it is struggling to work out how it can pay for the necessary infrastructure, and still they are going to have to probably put massive amounts of taxpayer money into aging government assets. Whereas the private sector would have done it already. So, in New South Wales the election result is absolutely crucial, not just for the economy of New South Wales, but for Australia's economy, because if Mike Baird cannot deliver the recycling of capital from existing assets into new productive assets it is going to have a hell of an impact on the Australian economy and cost jobs. 

PAUL KELLY:

So this is really a judgment on your policies, given your commitment to asset recycling, just as much as it's a judgment on his policies of asset recycling?

TREASURER:

Paul, this is about Australia's future. Governments haven't got an endless stream of money to build infrastructure. So, if they don't use what assets and money they have wisely, the infrastructure will not be built. That's the fundamental point.  If we don't build infrastructure we don't create prosperity, and if there is no prosperity we have a lesser quality of life into the future. 

PETER VAN ONSELEN:

Can I ask you about your new Assistant Treasurer, Josh Frydenberg. He has been talking on a pretty wide range of topics. I dare say that if Peter Costello's Assistant Treasurer had ever tried to usurp such views across the Treasury portfolio that he may well have been slapped down.  Are you and Josh Frydenberg been getting on well? 

TREASURER:

Excellent. And I was Peter Costello's junior Minister.  

PETER VAN ONSELEN:

I know.

TREASURER:

Josh is a formidable intellect and he is doing a terrific job. Look, everyone's doing a terrific job.  Kelly O'Dwyer's doing a terrific job as Parliamentary Secretary. Mathias Cormann's outstanding as Finance Minister. The whole team – Bruce Billson as Small Business Minister. I think our economic team is sensational. 

PAUL KELLY:

Okay, but the Government is not in terribly good shape. So, how confident are you that Tony Abbott can stabilise the Government and remain leader? 

TREASURER:

Absolutely. He was elected by the people; we are delivering for the people. If you look at what's been achieved in the short period of time, we've tried a lot, we've tried a lot, but we have achieved a lot. Things like, obviously, stopping boats from hitting our shores, getting children out of detention centres, removing 17,000 pages of red tape regulation on business. Abolishing the Carbon Tax but leaving in place compensation measures which increase household income.  Getting rid of the Mining Tax, closing down unaffordable expenditure associated with the mining tax.  Having a credible trajectory on the Budget.  These are all initiatives that have changed Australia.On top of that, we have dealt with very significant terrorist threats, national security issues, ranging from Malaysian planes that have hit the ground as a result of terrorist attack through to the loss of – still of a Malaysian plane in the waters off the Australia. It has been an incredibly fast paced 18 months.  That is the foundation for our future, to fix our future, to prepare for our future. 

PAUL KELLY:

Okay. Now, a question now about Joe Hockey.  Is it a fact that during that week of the spill motion the Turnbull people offered you the trade portfolio – that is moving from Treasury to Trade? And what did you say to them? 

TREASURER:

No, I don't respond to gossip, and that's all it is. 

PAUL KELLY:

What did you say to them? 

TREASURER:

Paul, I wouldn't use the sort of words that I used privately on anything publicly on a family show like Agenda. 

PETER VAN ONSELEN:

But did they offer you…

TREASURER:

No, no, no, I am not getting into gossip. Please, there's lots of very important policy issues that we still haven't addressed. I am not getting into gossip. 

PETER VAN ONSELEN:

Just one final one in the economic sphere, if I can. Let me ask you this: looking forward as the Government tries to deal with its short term political imperatives and some of the backflips are based on that, at the same time as its medium to long-term economic challenges, it sort of feels like that classic divide between the Treasurer and the Prime Minister. This always happens – Treasurer has to curtail spending or find revenue mechanisms, Prime Ministers are always looking to win re-election. It happened been John Howard and Peter Costello as well. 

TREASURER:

You are too much of a cynic, Peter. My relationship with Tony Abbott is incredibly close. We are both on Team Australia. We are absolutely determined to do what is right.  We can't judge modern politics by what occurred 10 or 20 years ago, and I was there 20 years ago. I remember the early days of the Howard government and they were not peaches and cream, I can tell you. It helps to have a very long memory in politics to learn some of the lessons. But at the same time, today and tomorrow are very different to yesterday in politics and in relationships. I would say to you the relationship between myself and the Prime Minister is very close because in 2015 it must be. It must be. 

PETER VAN ONSELEN:

Before we let you go, I just wanted to ask you about breaking news today which are these two teenagers who allegedly were looking to try to leave Australia to go fight with ISIS. They had their passports seized, they were stopped at the airport.  Is this a sign of things to come? I mean how concerning is it to have two people of such a young age to do something like that? 

TREASURER:

Well, our Customs officials have done a great job. We are dealing with a new terrorist threat and the terrorist threat is being supported by the poison that comes through the internet and through the words of others, which is – it is hammering the brains of young Australians. We've got to stop the poison of terrorism infecting the brains of every day Australians, particularly young Australians. That is exactly what we want to do with our metadata laws, changes to metadata laws and a range of other laws.  If we can stop the poison we can stop young Australians from doing stupid things like trying to go over and fight in the Armageddon of war in the Middle East. 

PETER VAN ONSELEN:

Joe Hockey, you have been generous with your time, perhaps that is why it is hard to get you on the program from time to time. 

TREASURER:

Always happy to come, I will be here next Sunday. 

PETER VAN ONSELEN:

Okay, we will lock that in and promo during the week. Thanks for your company.

TREASURER:

Thanks, Peter, thanks.