Monday, March 4, 2013
Hockey is much underestimated. If you've been watching you've seen him progressively donning the onerous responsibilities of the treasurership, the greatest of which is making it all add up.
He has used his - now less considerable - weight to avoid raising unrealistic expectations and to tone down overly generous promises. You can see him thinking: "I'm the guy who'll have to find a way to pay for all these commitments. We've made a huge fuss about the need to get the budget back to surplus and it'll be down to me to ensure it happens."
In opposition the temptation is to espouse populist solutions that sound good but don't work. As a former cabinet minister, Hockey knows it's hard for governments to get away with such wishful thinking. If you've been listening carefully you'll have noticed Hockey quietly taking an economic rationalist approach while others demonstrated their lack of economic nous.
Those who doubt the strength of Tony Abbott's economics team should note that Hockey would be backed by Senator Arthur Sinodinos, a former senior Treasury officer. I believe Sinodinos played a key part in formulating the "medium-term fiscal strategy" - "to maintain budget balance, on average, over the course of the economic cycle" - which the Libs developed when last in opposition.
If so, Sinodinos deserves induction to the fiscal hall of fame. There have been few more important or wiser contributions to good macro-management of our economy.
One of the greatest failings of the Rudd-Gillard government was the way, in an attempt to keep in with big business, it yielded to the temptation to modify its policies in response to lobbying from particular industries. The consequence was to annoy other industries and incite them to get in for their cut. But the more concessions business extracted from Labor, the more business lost respect for its judgment and self-discipline.
This generation of Labor doesn't seem to have learnt from its Hawke-Keating predecessor which, with some lapses, stuck to the line that the days of industry rent-seeking were over and that, in a well-functioning market economy, the main responsibility for solving an industry's problems rests with the industry.
Judging by his speech to a business audience last week, I suspect Hockey has learnt the lesson. He outlined the many ways in which he believed the Coalition's policies would be better for business than Labor's, but stopped well short of promising business everything its heart desired.
For instance, he discussed the case of "a significant manufacturer with similar operations in Australia and the United States", who complained that labour costs were much higher in Australia.
"Australian labour is expensive," Hockey said. "Is that a bad thing? No, not at all. We can compete with higher wages provided our output per worker is globally competitive.
"Higher household income means that our people have higher spending power. That provides a high standard of living and facilitates strong household consumption. And it benefits businesses because it provides a strong and expanding domestic market."
Australia's standard of living must not go backwards, he said. There was no national benefit in cutting wages. "What we do need to do is to ensure that our workers have the skills and knowledge that our industry needs. Education, training and retraining is a key step to unlock labour productivity gains. And we need to ensure that employment conditions can meet the varied and changing requirements of Australian workers and Australian businesses."
This was why, within the framework of the Fair Work Act, a Coalition government would look at "cautious, careful and responsible improvements to labour market regulation".
Hockey noted that part of the reason Australian wages seemed high relative to US wages was our high dollar, which "is impeding the competitiveness of Australian exporters and making life difficult for Australian producers.
"But on the other side of the coin," he said, "the high Australian dollar brings benefits for businesses which rely on imported goods, and for consumers who purchase cheaper imported products. So what could or should be done?"
He made two points in reply. First, there's no "correct" value for the dollar. Second, all movements in the currency create losers as well as winners. "Those who argue for a lower dollar are effectively arguing in favour of higher prices for consumers," he said.
A Coalition government "would need to be extremely cautious in tinkering with such a successful policy measure" as the freely floating dollar. "We would encourage businesses to view the high dollar as an opportunity. A high dollar means imports are cheap. Business should be utilising this period to import cutting-edge equipment and world-class technology."
Hockey is already sounding like a more forthright treasurer than the incumbent.