Hon. J.B.

HOCKEY
Treasurer
TRANSCRIPT
HARDTALK BBC WORLD NEWS
TUESDAY, 14 OCTOBER 2014 AEDT
LONDON

E&OE.
STEPHEN SACKUR:
Joe Hockey, welcome to HARDtalk.
TREASURER:
Great to be with you, Stephen.
STEPHEN SACKUR:
You made some very big promises about how you were going to manage
the Australian economy when you were in Opposition. It is proving pretty
hard to keep those promises, isnt it?
TREASURER:
Well, its always challenging but were determined to do it. Were
determined to deliver continuing prosperity and Australia is now in its
24th year consecutive year of economic growth. We havent had a

recession for 24 years. We are the custodians of that legacy; weve got to
keep it going.
STEPHEN SACKUR:
Everything is relative though, your growth is slowing from the highs of
three, four, five years ago, but not only that, youve got real problems.
Youve got a Budget deficit which is far higher than you said it was going
to be when you took office and it is also proving to be impossible for you
to keep the promise of balancing the books within a year or two you
said.
TREASURER:
Well no, thats not right, we didnt say that. We said we would have a
credible path back to surplus, were delivering on that. We said we would
get rid of the Carbon Tax, we delivered that. We said wed get rid of the
Mining Tax, we delivered that. We said we were going to have a big
infrastructure program, were rolling that out. Weve got unemployment
stabilised at around six per cent with a higher participation rate.
STEPHEN SACKUR:
Six per cent, which is, I believe, the highest in the Asia Pacific region
except for the Philippines. Thats not a great record for Australia is it?
TREASURER:

Well, no, it isnt, and thats what we inherited from our predecessors
twelve months ago. Now, were starting to see some good employment
growth and Im not as pessimistic as you might be about where the
Australian economy is heading at all. We are certainly at close to trend
growth but there is enormous opportunity in Asia we are going to
capitalise on.
STEPHEN SACKUR:
Well talk plenty about Asia but before we get there, lets just look at the
state of the economy in a bit more detail: you say, Look, there is no
cause for pessimism, but if youre one of the 17 per cent of Australians
who live below the poverty line and you see the priority that your
Government has put on austerity measures which appear to many people
to hit the poorest hardest, it is hard to be optimistic isnt it?
TREASURER:
Well, no, because the best way to give people on lower-incomes the
chance to get ahead is to give them a job, and well paid jobs, create an
environment where employment can prosper and one of the ways weve
done that in just 12 months, apart from abolishing the taxes and a range
of other things, weve signed two new Free-Trade Agreements with Korea
and Japan and we are certainly in advanced stages with China before the
end of the year.
STEPHEN SACKUR:

Well, I promise you, I do want to talk a lot about your relationship with
China in particular and Asia generally, but I just want to pick away a little
bit more about what is happening to the livelihoods of ordinary
Australians. For example, this austerity Budget, I guess I could call it,
that you presented
TREASURER:
No, its not austerity. I mean, thats a ridiculous term in the context of
Australia.
STEPHEN SACKUR:
Its a focus on cuts.
TREASURER:
Well, that doesnt make it austerity.
STEPHEN SACKUR:
Youre making major cuts across the public services, youre also trying to
find new ways to raise revenues and if you could just bear with me for a
second, lets just take a few of them: first, the excise duty that youre
raising on fuel, you said, Listen, poor people dont need to worry about
that because they dont have cars and they dont drive far. That
produced howls of anguish from ordinary Australians low-paid workers,
who travel every single day in their cars to low-paid jobs.
TREASURER:

We are asking Australians to pay an extra 40 cents a week in fuel excise

to help pay for the biggest roll out of road infrastructure in Australias
history. We have the equivalent of six snowy mountain schemes being
rolled out in the near term.
STEPHEN SACKUR:
My question is about who is being hit hardest; do you retract that
statement you made about poor people not having cars and they dont
drive far because the Australian Bureau of Statistics actually drilled into
that and they found that as a proportion of income, poor and low-paid
people actually paid more on fuel than rich people?
TREASURER:
Well, as is widely identified, wealthier people tend to pay more in fuel
taxes because they have (inaudible).
STEPHEN SACKUR:
Proportionate to income, poor people are hit harder. (Inaudible)
TREASURER:
That may be the case.
STEPHEN SACKUR:
So, you got that wrong.
TREASURER:

The fundamental point is this: that we are asking Australians to pay an

extra 40 cents a week in fuel taxes on average, in order to deliver the
biggest road building program in Australian history. Now, it is essential
as a nation that we pay our way, that we dont make the mistakes of
Europe and a number of other economies and borrow from the future to
pay for todays expenditure.
STEPHEN SACKUR:
Alright, thats just another specific policy that, again, raises questions
about who you are really hitting with your Budget program. The decision
to ask Australians to pay, I believe its an upfront $7 fee, when they go to
visit their doctor, something they havent had to do in the past. Again,
that is going to hit ordinary and lower-paid Australians hardest, isnt it?
TREASURER:
Well, we actually have very significant exemptions for people who are on
pensions and children under a certain age.
STEPHEN SACKUR:
Sure but my point is that people on average wages and below average
wages are now going to have to pay to go to the doctor.
TREASURER:
But everyone has to pay to go to the doctor, they either pay for it through
the taxation system or a large number of Australians

STEPHEN SACKUR:
(Inaudible) pay a flat rate fee which is regressive, as opposed to paying
through income tax which is progressive. So, again, youre switching the
focus in the way that youre handling the tax policies of your country to
hit the lower-paid and the less fortunate harder than the rich.
TREASURER:
Stephen, I dont accept what youre suggesting because I also introduced
a deficit reduction levy which increased the top marginal tax rate in
Australia. Now, the fundamental point is this, everyone has to contribute
in order to fix the mess that we have inherited. We cannot expose
ourselves to global volatility, we need to pay our way and if that means
that everyone has to make a modest contribution to the best health
system in the world, then so be it.
STEPHEN SACKUR:
Well, you know, its a mantra we hear in many different governments in
the western world, were all in this together, but the figures suggest
that inequality is rising across western democracies and I dare say, you
are concerned about that too, and if you are, does it make sense, as was
reported by a recent index study of corporate taxes, does it make sense
to continue to allow corporate Australia to avoid paying the 30 per cent
corporate tax rate to the point where this report suggested one third of
Australias top 200 companies only pay, in effect, 10 cents in the dollar of
corporate tax?

TREASURER:
Well, as a proportion of total income to the Australian Government,
company taxes actually represent more of a proportion than most
countries in the OECD.
STEPHEN SACKUR:
Of the top 200, 30 per cent are effectively only paying 10 cents in the
dollar.
TREASURER:
The data was wrong in that report. That was an independent report.
There was actually (inaudible) on the basis of incorrect data. The
fundamental point is (inaudible)
STEPHEN SACKUR:
Tell me what the real figure is then, if its not 10 cents in the dollar what
is it? Because it sure isnt 30 per cent which is what the corporate tax
rate is supposed to be.
TREASURER:
Well, the largest companies in Australia are paying the most tax. Thats
the fundamental point. Now, what our taxation
STEPHEN SACKUR:
(Inaudible)

TREASURER:
No, I am answering your question.
STEPHEN SACKUR:
Well, (inaudible) 10 cents in the dollar that so many of these companies
are actually paying, with all of their off-shore tax havens and their
complicated tax structures, what is the effective rate of corporate tax
(inaudible)?
TREASURER:
We have a 30 per cent company rate.
STEPHEN SACKUR:
Yes I know, theyre not paying it.
TREASURER:
The starting point is, one company that they cited as not paying 30 per
cent company tax rate actually doesnt make a profit. So, that is one of
the reasons why the report youre relying on is flawed. Now, to come
back to what is actually the case, the fact is, we get more of our income
as a percentage than almost any other OECD country. So, we rely heavily
on company taxes. Having said that, we want to make sure that wherever
companies are in the world, that they pay tax on the profits they earn in
that country.
STEPHEN SACKUR:

Are you going to go after corporate tax avoidance?

TREASURER:
Absolutely, absolutely.
STEPHEN SACKUR:
In a new way?
TREASURER:
Absolutely.
STEPHEN SACKUR:
How are you going to do it?
TREASURER:
Well, there are a number of steps. Firstly, through our leadership of the
G20, we are prosecuting the case for the new OECD rules in relation to
BEPS. Secondly, we are one of the first nations outside Europe to sign up
to a Common Reporting Standard. So, wherever you open a bank account
in the world, the data will come to our tax office. The third thing is: our
tax office is sharing information with other tax offices around the world.
Fourthly, we are signed up to support tax inspectors without borders, so
that companies that go to jurisdictions that have poor tax regulation will
help those regimes to collect taxation, and finally, our tax office has taken
a far more aggressive approach to ensuring that people comply with
existing or new Australian law.

STEPHEN SACKUR:
Every independent analyst says you are really going to struggle to deliver
on your promises to reduce, and then pretty much eliminate the deficit in
your term in office. You again, just to look at priorities, have decided that
one way you could do it is by imposing really quite severe cuts on higher
education. Given what youve told me about your commitment to
investment and infrastructure, does it make sense to be cutting the
investment in Australias people, in their higher education?
TREASURER:
Well, direct government investment is going to be reduced but the total
funding for universities will increase because we are de-regulating our
university sector so it is better able to compete with the rest of the world.
STEPHEN SACKUR:
And youre raising university fees and youre making the students pay
them back quicker. So, youre putting an awful lot of pressure on
Australias students at a time when youre actually saying the
Government is going to fund their courses to the tune of 20 per cent less.
TREASURER:
Actually, what we do is, instead of funding 60 per cent of the university
degree, itll reduce to around 50 per cent of the university degree. Bear
in mind that most Australians dont go to university and they are helping
to pay for those fees. Second point is, we give every student in Australia

a very generous loan scheme, where they borrow the money for the
university degree and they only start to repay it when they earn more
than $50,000 a year; it comes out of the tax system. Thirdly, we are
introducing the most generous scholarship scheme Australia has ever
had for those most disadvantaged as a result of it. Fourthly, we are
increasing the number of students that are actually going to attend
university and making that loan scheme available to people that might
not be able to go to university but want to undertake sub-prime degrees,
and finally, we are facing the challenge of universities emerging in Asia
with a quarter of a million students. Now, those universities can buy the
best academics in the world. We havent got a campus in the top 20 in
the world. We need to compete.
STEPHEN SACKUR:
And it helps, does it, to cut what youve said, is the Federal Government
university funding? It helps you compete to get yourself into the top 20
universities in the world? I am just struggling to see the logic.
TREASURER:
Because the growth in funding is going to come from students and the
growth in funding from students is sustainable. The growth in funding
from governments is not. So, the predecessor Government to us cut the
university (inaudible) but didnt allow universities to charge what they
need to, to be able to compete with the rest of the world.
STEPHEN SACKUR:

Interesting, already in this interview you have referred several times to

the challenge coming from Asia and the opportunities represented by
Asia. The difference between Australia and many other developed
economies one of the fundamental differences, is your massive reliance
and dependence on China as a marketplace for your goods, your exports.
Youre going to have to change that now, arent you? Because China is
slowing down pretty dramatically.
TREASURER:
No, I think there is a fundamental misunderstanding of Asia, here in
Europe, fundamental misunderstanding, complete misread, and the point
is, we have seen the emergence of the biggest middle class in the history
of humanity. They want to have what we have in western democracies.
They want good education, good healthcare, quality environments; they
want the very best for their children and they have got the money to pay
for it. And the fundamental point is, that we can export it to them. So, it
is not just about the commodities that Australia has been so good at
selling into Asia but now we are going to sell the quality of life initiatives
that help to improve the living standards of that middle class.
STEPHEN SACKUR:
I understand that as an ambition but you have got to deal with the here
and now. The here and now is that commodity prices are on the slide,
your mining industry is in a slump because of what is happening in the

Chinese economy and you have to accept that is going to have an

extraordinarily damaging short to medium term effect on your economy.
TREASURER:
Only short term and that is what we have got to see through. For
example, our volumes of coal have increased rather dramatically despite
the fact that coal prices have come down; why? Because we have
reduced our costs of production so much so that it is cheaper for us to
sell coal into China than it is for China to buy from Chinese coal
producers.
STEPHEN SACKUR:
Well, you know, that may have been true for the past few years but you
now know much better than I that the Chinese have imposed new tariffs
on your coal. Your own Government has said that is going to be very
damaging to your industry. It comes back to this question of over
dependence on China. You dont know what is going to happen in China.
The seven per cent growth rate they are maintaining right now might slip
to six, might slip to five. You dont know what the politics of China is
going to be but you are extraordinarily dependent on them.
TREASURER:
Well you see, this is where there is a fundamental misunderstanding
because a growth rate of seven per cent in China today, is the equivalent
of roughly a 14 per cent growth rate ten years ago in China. China will

continue to grow because it must. There is no choice. They need to

create the 13 million new jobs a year for their population.
STEPHEN SACKUR:
(Inaudible) upset your Government by imposing the tariff on coal, they
appear unwilling to sign a free-trade deal with Australia on the basis that
you want it, your own Prime Minister Tony Abbott is saying that those
talks may come to an end by the end of the year if the Beijing
Government doesnt give ground. There is a real problem political
problem, between Australia and Beijing right now.
TREASURER:
Well, I dont detect that at all.
STEPHEN SACKUR:
Are you not reading the newspapers like me?
TREASURER:
No, because I set the news that goes in the newspapers. I can give you a
better response and the response is that our relationship with Beijing is
deep and broad and we will see how the free-trade Agreement goes but I
obviously have been involved in discussions. I would say this to you
STEPHEN SACKUR:

(Inaudible) This is really important, I am sure many Australians want to

know the answer to this: if there is no free trade deal by the end of this
year, will the negotiations end?
TREASURER:
Well, I am not going to speculate on that. What I will say to you is that we
are in deep negotiations with China. It has been accelerated under the
Abbott Government. They are also very keen for us to join the Asian
Infrastructure Investment Bank that they are setting up with 20 other
countries. Not only that, we have recently approved a large number of
Chinese investments in Australia, and China has given us access in other
areas as well, including financial services.
STEPHEN SACKUR:
How unhelpful is it to you when one of Australias most prominent and
richest businessmen, Clive Palmer rails against a particular Chinese
company that he is locked in a dispute with but goes further and talks
about, and this is a quote from him, it is unpleasant words but it is a
quote from him, Chinese mongrels who shoot their own people they
havent got a justice system and they want to take over this country, i.e.
Australia. Now this is a man that sits in a political position in the
Australian Parliament, he commands what, four seats I think, in the
Parliament? He is one of your most prominent public figures and he says
things like that. What do you think that does to your relationship with
Beijing?

TREASURER:
Well, it sends a message to Beijing that we cant control our press and we
cant control what people say but Mr Palmer did say that. He then
apologised for it. The fact is, he is involved in a very deep and very
acrimonious dispute with a Chinese business partner and obviously
(inaudible).
STEPHEN SACKUR:
This is what the Global Times in Beijing said afterwards, it said, these
remarks are a symbol that Australian society has an unfriendly attitude
towards China.
TREASURER:
Well, that is just dead wrong.
STEPHEN SACKUR:
You have got a problem though, havent you?
TREASURER:
No.
STEPHEN SACKUR:
Well it is not me saying it; it is the Global Times in Beijing (inaudible).
TREASURER:

Well, that is wrong. (Inaudible) there are you know, probably more than
half a million Australians that speak a Chinese language every night at
home. There has been a significant increase in direct Chinese investment
into Australia in the last two years. There is a deepening of ties with
China but it is not only China. The story of Asia is not just China, it is
STEPHEN SACKUR:
(Inaudible) the worlds dominant economy. If you are so sure that
Australias economic relationship with China is the future for your
country, is that why many people noticed your Government really didnt
get involved at all with the pro-democracy protests in Hong Kong, didnt
express any support for them, didnt condemn the Chinese Government
and the Hong Kong authorities for, essentially saying that there couldnt
be genuine democracy in Hong Kong by 2017? Is that why you just
avoided that issue altogether?
TREASURER:
No, we didnt avoid it. We obviously called for calm like many other
countries around the world called for calm, but fundamentally, it is an
issue for the Chinese Government.
STEPHEN SACKUR:
(Inaudible)
TREASURER:

Well, ultimately is a matter for the Chinese Government.

STEPHEN SACKUR:
I am asking you what you think.
TREASURER:
I would love to see democracy and freedom everywhere, everywhere
across
STEPHEN SACKUR:
I am asking you about Hong Kong. As a senior Minister in the Australian
Government (inaudible) the Chinese must let genuine democracy reign in
Hong Kong.
TREASURER:
Well, it is fair comment but I want to talk to you
STEPHEN SACKUR:
(Inaudible)
TREASURER:
It is fair comment but I want to say to you, the story of Asia is not just
about China. It is about India, it is about Indonesia, it is about Vietnam, it
is about opportunity for the whole world. Not just Australia, not just the
United States, Europe in particular, and the first country in Europe that

starts focusing on the broader opportunities in Asia will get a massive

advantage over others that is so internally focused.
STEPHEN SACKUR:
Right, you sell an awful lot of coal in Asia and that raises questions about
Australias commitment to cleaning up its act. You are one of the dirtiest,
most greenhouse emitting countries in the OECD group of developed
countries. Is your Government prepared to do anything to clean up its
act?
TREASURER:
Well firstly, the comment you just made is absolutely ridiculous.
STEPHEN SACKUR:
Why?
TREASURER:
Well, Australia is a significant exporter of energy and in fact, when it
comes to coal, we produce some of the cleanest coal, if that term can be
used the cleanest coal.
STEPHEN SACKUR:
(Inaudible) Highest per capita emitter of greenhouse gases of any nation
in the OECD. So, what is wrong with what I am telling you? You are a
very polluting nation and you have got a decision to make as a

Government about whether you are prepared to do anything serious to

change that.
TREASURER:
Stephen, I dont accept the basis of your question, and why? Because
weve got a small population and very large land mass and we are an
exporter of energy, so that measurement is a falsehood in a sense
because it does not properly reflect exactly what our economy is. We are
on the threshold of becoming the biggest exporter of gas in the world. We
are a major producer and exporter of coal. We are now selling uranium to
India. We are an exporter a trustworthy, reliable, predictable exporter
of energy that is helping to drive the emergence of the middle-class in
Asia. Now, that should be welcomed.
STEPHEN SACKUR:
The Australian Labor Party Leader Bill Shorten says that just as the G20
meets in your country, Australia is being seen around the world as the
climate change sceptic capital of the world. Are you happy with that?
TREASURER:
Well, that is Bill Shortens rhetoric. I mean, he is in Opposition
STEPHEN SACKUR:
You know what he is basing it on? He is basing it on things like, for
example, your own Climate Change Authority in Australia saying that

your target of cutting emissions by five per cent is inadequate, it should

be at least 15 per cent.
TREASURER:
Well, there is irony there because that five per cent target is what Bill
Shorten has as well.
STEPHEN SACKUR:
Yeah, he now says it needs to go further. (Inaudible) Climate Change
Authority which ironically enough, your Government is threatening to
abolish.
TREASURER:
And there you go; Bill Shorten is threatening to re-introduce a Carbon
Tax. He wants to re-introduce a Carbon Tax into Australia. We wont reintroduce a Carbon Tax into Australia. Australia introduced one, went
further than the rest of the world expecting that everyone was going to
be right behind us, looked around and there was no one there. And why
would we do that when we are a major energy exporter. So, the best way
you can ultimately deliver on anything to address climate change is to
make sure that governments all around the world have the money to
spend on addressing the issue. So, if you lift the living standards, help
countries around the world to lift their quality of life by giving them
energy opportunities
STEPHEN SACKUR:

(Inaudible) But just a final question: when your own Prime Minister, Tony
Abbott opened a coal mine, I think just yesterday in Queensland, he said,
Coal is the future. It is good for humanity and you can bet it is good for
Australia. Is that the kind of Prime Minister that you think is going to
deliver a better, cleaner future for not just Australia, but for the world?
TREASURER:
Well, because we are exporting coal so that nations can lift their people
out of poverty, and that is a fundamental point, we are exporting gas, we
are exporting coal, we are exporting uranium. I mean, it is easy to sit in a
nice studio here in Britain and reflect on you know, what climate change
is and what energy is but fundamentally, when people havent got
electricity, they havent got clean water, they want what Australia has
and we stand prepared to get it to them.
STEPHEN SACKUR:
We have to end there. Joe Hockey, thanks for being on HARDtalk.
TREASURER:
Thanks very much.
STEPHEN SACKUR:
Thank you very much.