Andy Xie just debated Joe Hockey at an AFR forum and the result can be captured in the following snippet:
13.23pm: Discussion turns to the Australian dollar.
Is Hockey worried the dollar is no longer cushioning the economy?
“The market is the market, and at the moment the market in equities, the market in currencies in yields, it’s all pricing to precision … the highly traded currencies ahead of us, they’re all being interfered with by public sector policy. We’ve just got to hold our nerve.”
It is important, he says, to look at the opportunities that the $A gives us to “retool Australia” and we can be more aggressive, say, by expanding offshore. “I’m not one for interfering with the currency.”
13.19pm: Another one for Hockey, this time on the ‘entitlement culture’.
Hockey says Australians know to live within their means – just look at Europe. And America is not far behind.
Our competition is coming out of Asia, Hockey observes, as well as South America and Africa. “We need to be honest with the Australian people,” Hockey says. The school kids bonus is already abandoned and the community accepts that.
Just look at the US, where sequestration was meant to mean the end of the US economy (some claimed). Clearly, it hasn’t been a burden.
13.15pm: Now it’s Joe Hockey’s turn.
He’s asked about the global growth outlook and Xie’s comments.
What does he think? (No politics please). Should Canberra prepare for the Andy Xie scenario?
“Im not as bearish as Andy,” he starts. It’s probably the most volatile global economy in a generation. We’ve got to see opportunities in our region and yes, structural reform too. N
What about returning the budget to surplus?
“It’s important to be prudent but we’re not going to go down the path of austerity” just to get back to surplus, Hockey says. He reckons the surplus idea is fanciful and some forecasts have proved inaccurate. Be realistic about the revenues, he urges.
“We’ve been saying for four years don’t go and spend all the money,” Hockey says. Companies will unleash their balance sheets and so will consumers if there’s a change of government.
13.12pm: When you have economic prosperity there is always a reason for that, Xi says.
China’s boom has been good for Australia but there’s a lot of hot money too. The money supply gets exaggerated in this kind of boom cycle. Commodities are entering a prolonged bear market and Chinese demand is likely to be stagnant.
This is bad news for Australia. Again, that’s going to be a period of difficulty but Australia is flexible in that the exchange rate will take much of the pain.
After this Australia needs to do loads of reform to revive growth.
Joe Hockey was decent but didn’t engage with Xie’s views on China, simply dismissing them as bearish. He was equally hapless on the dollar using the phrase “hold our nerve” repeatedly instead of engaging in any argument. Probably most importantly, Hockey said there would be no “austerity” in Australia.
Good on the AFR for putting this on but I reckon they should leave the pollies out of it. They are too practiced at ignoring the substance of a discussion. Xie versus Eslake or Bloxham would have been better.
