Hockey Must Get The Stick

Menzies House Editor and Co-Founder Tim Andrews pronounces critical judgment on Joe Hockey's recent comments:

It would be an understatement to say that I, like so many Liberals (and sound economists), was distraught to hear the latest pronouncement of Joe Hockey that we ought re-regulate the banks. A flashback to the failed policies of the past, to the days when radical Keynsian dogma led to stagflation and a destroyed economy, I can not deny that I felt great sympathy with Don Randall MP, who called it an idea from the “lunatic fringe”. Because, after all, this is a concept that even economists on the left would reject. Indeed, so discredited is this big government micromanaging concept, that it is little more than an academic humour, the punchline of cocktail party jokes. And yet it, apparently, has somehow become policy of the Liberal Party, a party ostensibly committed to economic freedom, and a party I love dearly.

As much as it fills me with dismay to admit it, for I genuinely do like the bloke, the conclusion from this debacle is inevitable: Hockey has got to go. Now, don’t get me wrong. Joe Hockey is a great guy. I love his stuff on civil liberties. In his Sunrise appearances he would always come across as jovial and likable and fun, and every time I saw him in person he was friendly, personable, and funny. I can say nothing ill of him as a person.

At the end of the day, however, politics is more than about who is ‘nice’. Rather, is about who makes the cut, and who 'gets it'. And, sadly, Mr. Hockey does not. With all due respect to the man, he has a litany of failures behind him. As Finance Minister he was more than a joke- he was a debacle. I remember well his disgrace in promoting the GST, and why he had to be demoted. As Tourism Minister, he was no better – really, we can find no way around the simple fact that he was an utter failure. And, while many of the Workplace Relations problems may not have been directly attributed to him, he was hardly a success. He can not hide from his track record.

More importantly though, let us just look at his performance at the last election. I think no-one can disagree that, for all his efforts, he was an abysmal, disgraceful failure. A total, absolute, and utter incompetent. He couldn’t get the message across, he couldn’t master the detail, and he just couldn’t connect with the electorate. When I visited Australia back in August, one refrain came through from every single one of my staffer friends: “f**king Hockey”. CHQ workers, State Office apparatchiks, parliamentary staffers – the refrain was unanimous (and cross-factional). He was the greatest disappointment. Words like “lazy”, “incompetent” and “ineffectual” were perhaps amongst the nicest ones used. Indeed, one of the most telling memories of my trip was sitting down for a drink with someone ideologically certainly not a friend of mine, and being told “Mate, you were right. I take it all back. Hockey’s a joke and he’ll lose it for us”. In politics, intellectual rigor does count for something. And, sadly, in this game, being a good guy is not enough. Mr. Hockey is clearly out of his league.

The Coalition is in a great position at the moment. Labor’s adherence to radical left ideology has created the space for Tony Abbott to do great things, as reflected in the polls, and so for an economically-illiterate Shadow Treasurer to threaten to undo all the good really chills the blood. Particularly when he is proposing to take us back to the economic dark-ages, and gives Labor an opening to shred our economic credibility, and destroy our reputation with the business community. After all, when the unabashed neo-Marxists, who explicitly state in their policy platform that economic growth is an anathema and wish us to all live in poverty (equally), endorse your agenda, then you know you have a problem.  

At the end of the day, as much as I may personally like the guy, it is clear to me, it is clear to everyone, that he simply lacks the intellectual weight and economic understanding to be Shadow Treasurer. Put him in a warm, fuzzy portfolio like Health, and he will shine. But the Treasury is not for him. And so it is time to be cruel to be kind, and arrange the reshuffle that is so desperately needed.

And look, I believe in Party loyalty. I have dedicated so many years of my life to the Liberal Party, and I have no regrets for it. I truly love the Party, and all the opportunities it has given me. And it is for the sake of the Party that I say these words. Because although, perhaps, in some quarters it will cause problems for me, I know that in the long term, it is for the Good.

He’s a great guy, but for the good of the Coalition, and for the long-term prosperity of Australia, from Treasury Hockey has got to go.

Tim Andrews is a Washington DC based political consultant, and is an editor and co-founder of Menzies House. He served as President of the Australian Liberal Students' Federation and as Vice-President(Policy) of the Young Liberal Movement of Australia (NSW Division) from 2006-2008. His personal blog is The Musings of an Australian Classical Liberal in Washington DC.

Comments

[Vikas Nayak]

1.

Who would you replace big joe with?

[Tim Andrews]

2.

Robb. He is a shrewed political operative, he is solid economically, and he is a solid guy.

(Tim)

[Joseph Clark]

3.

Vikas: have two guesses.

[Terry Barnes]

4.

This is a bit too hard on Joe. The current problem in my mind is not individuals but the propensity of too many of the frontbench to burp up thought bubbles and serve soundbites as policy before thinking it through. It's OK for an Opposition with no hope of winning office, but times have changed. If the federal Libs are going to position themselves to take government, the hard policy development should have already started before the dust of the last election settled, something I wrote about recently for MH.

In Joe's defence he's a great party man and as a fundraiser he's a trouper. He's even coming down to help out Victorian Liberals who need all the fundraising help they can get. (And don't get me ggoing on the Vic Libs!) I heard that Andrew Kirk has left his office, though, and that's a big loss not just to Joe.

[Robert Candelori]

5.

I'd have to agree with Terry Barnes. Dumping Hockey isn't an option.

[Tim Humphries]

6.

I agree, Andrew Robb is an excellent replacement, however I'd put Turnbull is as Shadow Tres, give him 12-18months to implode then give Robb a Guernsey when its about 12months out from the next election, that way he could have a good crack at it.

[Ben]

7.

I tend to think you’re right. You make a genuinely strong case without any personal references to Shrek.

[Tim Humphries]

8.

I agree, Andrew Robb is an excellent replacement, however I'd put Turnbull in as Shadow Tres, give him 12-18months to implode then give Robb a Guernsey when its about 12months out from the next election, that way he could have a good clear crack at it.

[david M Russell]

9.

Ah, the glory days! How wonderful we have THREE potential candidates: Joe, Andrew and Malcolm. Wow, we must be nearly ready for government.

[Sean]

10.

Hockey overstepped the mark with his comments arguing for regulating interest rates. It characterised a person more interested in media coverage than a serious politican.

However, Hockey's speech on Monday (http://joehockey.com/mediahub/speechDetail.aspx?prID=1078) really hit the spot. It is just unfortunate that we have a person who cannot be trusted without an advisor whispering in his ear what to say or writing down a speech for him to read out.

[Brett]

11.

His comments are completely unacceptable and it is absolutely sickening that the liebrals claim to be anything remotely resembling a "free-market" party.

[Brett]

12.

And LOL, he criticised the estimations of inflation, claiming that prices actually are rising...and he thinks lower interest rates are good idea? sigh...

[Sean]

13.

Hmmm... I misspelt "politician" in my post above.

Brett - it is one of those times where Hockey thought that he was on a winner because the media was paying attention to him. In any case, Hockey made a salient point about a social contract involving banks, government and the broader public.

[Clinton Mead]

14.

I think people are being a little tough on Hockey.

It's hypocritical to suggest that banks should be allowed to operate in the free market whilst they get handouts and guarantees from the government, particularly in the form of access to cheap credit from the Reserve.

Whilst Hockey's solution has some serious issues, if the Banks want to use printed (i.e. counterfeited) money from the Reserve Bank, at the very least they should have to agree to some conditions.

If the banks have a problem with it, they don't have to borrow money from the Reserve. I'd like to see how profitable they are then.

The big four like to go on about deregulation and the free market, but in a truly free market (i.e. without Reserve Bank credit), they wouldn't be profitable under their current business model. They are greatly subsided by government creation of credit, and taxpayers pay for it through inflation.

We have a nationalised banking system. The banks are effectively little more than retail outlets for the Reserve. This is seen by the fact that their interest rates are so tightly linked with the Reserve rate. Our nationalised banking system brings together the worse of socialism and the worst of government funded corporatism.

There is something wrong, and conservatives shouldn't just dismiss Hockey and pretend everything in the banking system is all great.

Instead, conservatives should be using the opportunity of this debate to argue for denationalisation of the banking system.

[Mike Borgelt]

15.

Joe Hockey is the Liberal party's version of Kim Beazley. Fat, cuddly, good bloke who stuffs up everything he touches. Kim screwed up the airline deregulation , the submarines, telecoms, the 1998 election for Labor(by wanting to capital gains tax real estate holdings bought before the tax's introduction - explicitly exempted when the tax was introduced) etc. The list goes on.

Hockey needs demotion before he really stuffs up. He's also a global warming believer (not that he'd know anything about it but his wife works for Deutsche Bank who are keen on it.) To think he was in line for Liberal leader. What a joke.

[Sean]

16.

Clinton,

Some good points but slightly hyperbolic regarding the "nationalisation" remark or "counterfeit" money. The major banks are being backed by both the RBA and taxpayers. They get the upside of credit growth and risk taking but expect the taxpayer to take the downside.

[Vikas Nayak]

17.

Your comments are slightly conflated as others have put it, but failing a policy to break down the "4 tier banking structure" would the government releasing its hold of monetary policy be a good thing entirely?

I am convinced that private monies will do a better job of determining the real value of currency, however im still a monetarist on the grounds that 2 reigns is better than 1 in terms of sustainable development. I think we get a lot of economic stability for very little inflation (within 1-2%) with a monetary reign the government controls.

[Clinton Mead]

18.

Maybe I didn't focus on my point very well...

Regardless of what you think of a central banking system, the reality is that Reserve Bank money is public money, and the banks receive it at taxpayers expense. It's technically borrowed money, but because the money supply almost always expands, it's borrowed money which is never paid back, so in effect it works as a direct taxpayer subsidy.

It's not against the idea of "less regulation" to audit and control how a government department uses public funds. If heads of a government department were using taxpayer dollars for multi-million dollar salaries we'd be justifiably concerned.

Likewise, is it against the idea of "less regulation" to audit and control how a bank uses it's public funds. The extent may not be as much as a government department, but the need certainly exists.

Hockey's particular implementation of this regulation may be unsound, but the idea that we should more tightly investigate and control the use of public monies in the banking system I believe is a good idea.

At the same time, we should reduce regulation on those institutions which do not use public funds, as a reward for them managing their own risk and actually being profitable without the help of the state. This would improve their competitiveness against the big four, and result a more stable financial system that doesn't need to be propped up and inflated by government.

[Pip]

19.

Thankyou for your considered comments with which I broadly agree.

In my view we are in a changed economic environment post GFC. It is therefore silly for Gillard to suggest every reform of the Australian economy made in the 1980's should be set in concrete forever. There needs to always be a bit of flexibility in the mind and in the use of levers.

Most importantly, I'm not sure if it has been mentioned here that the Australian Government is guaranteeing the Banks up till October, 2011. To me that means the Banks owe greater necessity to listen to the Government.

We tax payers are guaranteeing the Banks. Don't forget that.

[Clinton Mead]

20.

We tax payers are guaranteeing the Banks. Don't forget that.

I agree.

I don't think this is a great model, but it's the one we've got for the moment.

Because the taxpayers guarantee the banks, the profit and risk signals that would ordinarily constrain financial institutions in a free market is counteracted by not only bailouts, but also the simple fact that governments can be relied on to drop rates when things goes bad.

This encourages financial institutions to take extra risks, and creates the unstable financial system we've seen recently.

We need to move away from this model, by encouraging financial institutions that don't rely on the state. In the meantime, we have to continue to prop up the banks who are so dependent on Reserve Bank taxpayer credit, but we need to do so in a way that is well regulated so taxpayer dollars are not wasted.

[Clinton Mead]

21.

the Australian Government is guaranteeing the Banks up till October, 2011

If my bank dropped my rates if I lost my job, I'd feel a lot more secure.

The government really does guarantee the banks, by dropping rates when they're in trouble. This is far more important than the deposit guarantee, because the taxpayer is already bailing the banks out with extra credit. So, aside from gross incompetence or fraud, the banks will never need to use the deposit guarantee, because the rate drop will act as a taxpayer bailout. This system will continue well after October 2011, so the taxpayers guarantee effectively goes well past October 2011.

[JC]

22.

We tax payers are guaranteeing the Banks. Don't forget that.

This is easy to solve. Simply demand the banks hold 20 tangible common equity and then get out of the way. That about the only regulation you need.

[JC]

23.

oops 20%

[Andy Semple]

24.

As much as it pains me to say it, Put Turnbull in as Shadow Treasurer. Sorry Joe, but even Swan has run rings around you.
As for the attacks on the banks. I can appreciate that the sentiment will echo with Joe Public, but it flies in the face of the Liberals Small Gov/Pro Markets thinking. I too thought it was at first dreamt up by the loony left of the Greens. I was half right, the Lefts from within.

[Pip]

25.

I do think Joe Hockey was brave to stand up on this issue, obviously he was doing it to show that Wayne Swan only mouths platitudes on this issue.

I think the Coalition having decided to back Hockey means that everyone should just hang in for him instead of him getting all this friendly fire.

He has made some good points. The GFC took out all the smaller players, which is why all the big players try and give these busts, ("boom and busts") a helping hand, it leads to consolidation. The coalition as supporters of small business should not be backing bank consolidation.

Joe Hockey did not bring this on by himself, the ACCC is concerned. The ANZ came out with big profits today and at the same time laid into Joe.

The Coalition should look past the populist press and see what is really happening.

Thank you Clinton Mead for your good analysis.

[Pip]

26.

Further, I maybe wrong in thinking Joe Hockey can play this sort of wedge politics with any flair but it seems all the Coalition and supporters are sitting on the side wringing their hands and being nervous nellies.

It probably will back fire unless someone credible comes out and backs him because from what I see here is just a sea of nervous nellies.

[Pip]

27.

It is paradoxical in some ways that conservatives and libertarians have the mantra of deregulation as a doctrine when, if you think it through, conservatives at least believe in competition and small brigades.

I have read chapter and verse here on the perils of concentration of power and centralism.

It is obvious if you think about this Bank issue and David M Russell’s Book prizes for new writers that Capitalism by its nature tends to concentration. The banking system since the GFC has lead to a concentration basically around the big four who signal to each other publicly in an anti-competitive manner.

It would seem that regulation is actually required to keep the system open to competition. The opposite of John Howard's unchain my heart doctrine of deregulation.

It would be interesting to hear from some of you if you‘re involved in Competition Law.

[Clinton Mead]

28.

It would seem that regulation is actually required to keep the system open to competition.

The reason why the system isn't open is because of government regulation.

The government regulates interest rates, and regulates that taxpayer dollars will prop up the banks through an ever increasing monetary base.

Due to this regulation, it's impossible to compete.

Regulation is the cause of the lack of competition, but deregulating what banks can do with public funds actually makes the problem worse.

This is because deregulating the banks is like passing a regulation on non-bank financial institutions that they must subsidise the banks.

Regulation, namely the handing out of credit to the banks from government, is what causes this problem. More regulation will only make things worse, unless it is actually regulation that addresses the cause, which is an unlimited supply of non-risk priced credit which effectively never needs to be paid back from the Reserve.

Think of it like this:

We have a regulation that:

(1) Gives company X $Y
(2) Takes away from company x $Y.

Ideally, we remove both regulations. But it's better to have both regulations as just one, because in this case two regulations evens it self out and is closer to the natural unregulated state.

This is like the banking system. The banks have a positive regulation, which gives them credit at taxpayers expense. Because, and only because of this regulation, additional regulation to counter this regulation may be beneficial over the status quo.

However, keeping in mind, our final result is ideally removing both sets of regulation.

[Brett]

29.

the only regulation you need is a gold standard

[James Darby]

30.

Indeed Brett:
There is no need for any regulation other than a standard that a bank may only lend money that it has and on that basis the monopoly of the banks be removed by allowing the licencing of those who wish to compete to do so. $11B Black Hole Joe has zero understanding of the relationships between individuals in an enterprise society.

[Clinton Mead]

31.

I'm not sure the taxpayer funding the government is to buy lumps of gold and store them in vaults is a much better solution.

Some solutions I would prefer would be for example would be basket of shares in companies and ownership in land. It would require less government involvement, just a little regulation to ensure that these private currencies are not fraudulent.

If we need to, we could still use the Australian Dollar for day to day short term transactions, as long as the vast majority of our wealth is in a store of value which is based on something other than paper. This would lead to a more stable financial system.

You can't eat paper, you can't eat gold, but you can eat the food from the farms, factories and the capital goods that companies produce. As a result the value of sort of money is likely to be more stable than paper, and even gold.