Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Disclaimer: The Parliamentary Library does not warrant or accept liability for the accuracy or usefulness of the transcripts.These are copied directly from the broadcaster's website.
Lateline -

View in ParlViewView other Segments

Tonight, road block. The Prime Minister loses patience with Malcolm Turnbull's Opposition to his
stimulus package.

I would say to Mr Turnbull and the Liberal Party, get out of inrofed the Government getting on with
the job of nation-building and supporting jobs at a time of national economic emergency.

He's going to take us deeper and deeper into debt. $200 billion. In order to fund cash handouts.
What will we have to show for that?

Good evening. Welcome to Lateline. I'm Leigh Sales. Well, if you listen to the Government, the
Opposition's decision to block its stimulus package is the height of irresponsibility. And if you
listen to the Opposition, it's Kevin Rudd who's behaving recklessly.

These guys are giving drunken sailors a bad name. I mean, they are seriously going hell for leather
on the accelerator without any regard for the future impact.

The Opposition is grossly exaggerating these circumstances. Let me tell you where the projected
debt level will hit in three years time. It will hit exactly the same level that prevailed in
2001/2002, seven years ago, halfway through the term of the Howard Government.

So who should we believe? You can judge for yourself tonight as the Finance Minister Lindsay Tanner
and his Opposition counterpart Joe Hockey join us for our regular Friday night forum. Gnats coming
up. First, Barack Obama's $1.4 trillion stimulus package comes under Republican attack and storm
warning, devastation on the

Minor parties pose new threat to Rudd's stimulus plans

Minor parties pose new threat to Rudd's stimulus plans

Broadcast: 06/02/2009

Reporter: Kirrin Mckechnie

The Prime Minister is becoming increasingly frustrated that his $42 billion economic stimulus
package is not getting a simple run through Parliament. Now the minor parties are posing a new
threat - they are seeking more money to assist the unemployed.

Transcript

LEIGH SALES, PRESENTER: Get out of the way - that's Kevin Rudd's message to the leader of the
Opposition.

The Prime Minister is becoming increasingly frustrated that his $42 billion economic stimulus
package isn't getting a simple run through Parliament.

Malcolm Turnbull is sticking by his view that the package is too big, even though he concedes that
such a stance could prove to be unpopular with voters.

And now the minor parties are posing a new threat: they're seeking more money to assist the
unemployed.

From Canberra, Kirrin McKechnie reports.

KIRRIN MCKECHNIE, REPORTER: Testing the mood of the nation.

MALCOLM TURNBULL, OPPOSITION LEADER: So, tell me, what do you think of Kevin's big splurge, the $42
billion?

VOX POP: I reckon you've got to keep it to tax cuts, mate. Keep at 'em.

KIRRIN MCKECHNIE: Malcolm Turnbull took a stroll through a Sydney shopping centre to gauge how the
punters are taking his decision not to back the Government's stimulus plan and they appeared to be
sticking to the script.

VOX POP II: Good to see you holding the Government to account on all that big bucket of money
they've got.

MALCOLM TURNBULL: Yeah, well, it's a big bucket of debt.

KIRRIN MCKECHNIE: Yet the Opposition leader is still gearing for a backlash.

MALCOLM TURNBULL: I still believe it will be unpopular. I thought it was gonna be poisonously
unpopular, frankly, and we all felt we were going to get hammered into the ground in the opinion
polls. And we probably will be. But we took this stand because it was right.

KIRRIN MCKECHNIE: But Kevin Rudd has had enough.

KEVIN RUDD, PRIME MINISTER: Get out of the road of the Government getting on with the job of
nation-building and supporting jobs at a time of national economic emergency.

KIRRIN MCKECHNIE: Hosting a forum of business, union and welfare groups in Canberra.

KEVIN RUDD: My single ask of you is to put all hands to the pump.

KIRRIN MCKECHNIE: Kevin Rudd had hoped the legislation governing the stimulus measures would be all
done and dusted by now. But it's looking increasingly likely the crossbench Senators are not going
to let the package pass the Upper House without some amendments of their own.

BOB BROWN, GREENS LEADER: It is not our job to be putting the Government on the rack here. But nor
is it the Government's job to say, "Take it or leave it." We're all mature and sensible enough to
say, "Let's come up with a better result."

KIRRIN MCKECHNIE: Perhaps not.

WAYNE SWAN, TREASURER: If people muck around with this package in the Senate they will delay vital
payments to families.

KIRRIN MCKECHNIE: On that, Centrelink backs the Treasurer up.

FINN PRATT, CENTRELINK: If there are changes made next week, it is quite likely that this will
result in a deferral of our implementation date.

POLITICIAN: By how much?

FINN PRATT : It could easily take up to another month.

KIRRIN MCKECHNIE: But the Family First Senator isn't deterred. He wants $4 billion set aside to
help the unemployed.

STEVE FIELDING, FAMILY FIRST SENATOR: This package, $42 billion, fails those forgotten Australians.
It's demoralising when you lose your job. Then the next thing is, you lose your home.

KIRRIN MCKECHNIE: Demoralising is one word to describe the latest economic assessment from the
Reserve Bank. It's estimating the Australian economy will grow by just a quarter of one per cent in
the year to June, narrowly avoiding a plunge into recession. The RBA also expects unemployment to
soar.

WARREN HOGAN, ANZ BANK: Generally speaking, they're still concerned about the outlook and certainly
have no illusions about how weak the Australian economy's gonna be this year. We know that from
their forecasts where they're expecting growth in the year to June this year to be essentially
zero.

KIRRIN MCKECHNIE: And it appears the series of massive interest rate cuts are over.

WARREN HOGAN : There's probably no more big rate cuts ahead. They're gonna be more moderate, small,
25 or 50 basis point moves from here on in.

KIRRIN MCKECHNIE: Some moderation on the horizon after a week of extremes. Kirrin McKechnie,
Lateline.

Obama in debate over proposed economic plan

Obama in debate over proposed economic plan

Broadcast: 06/02/2009

Reporter: Rafael Epstein

Just like Kevin Rudd, US President Barack Obama is also locked in a fierce debate over the size of
his proposed economic stimulus plan, now worth $1.4 trillion.

Transcript

LEIGH SALES, PRESENTER: Just like Kevin Rudd, US President Barack Obama is also locked in a fierce
debate over the size of his proposed economic stimulus plan, now worth $1.4 trillion.

The Republicans are trying to reduce it dramatically and add more tax cuts, but President Obama
says any dilution of his proposals would represent a return to the policies that he says got
America into economic trouble in the first place. Rafael Epstein reports.

RAFAEL EPSTEIN, REPORTER: In the Senate, Democrats are fighting hard to pass the President's
package of spending proposals and tax cuts. There's intense partisan debate over $1.4 trillion. As
one commentator wrote, the elation of Inauguration Day has given way to a classic form of partisan
hardball.

LINDSEY GRAHAM, SOUTH CAROLINA SENATOR: Look at this bill. This bill has got to be done by tonight.

BARBARA BOXER, CALIFORNIAN SENATOR: Holding up a bill, theatrical. Did you ever do that when George
Bush was president and he sent down a bill twice as big as that?

LINDSEY GRAHAM: If this is the new way of doing business, if this is the change we all can believe
in, America's best days are behind her.

RAFAEL EPSTEIN: Off the Senate floor, the two sides were actually trying to cut out what
Republicans call extraneous spending on items like transport and the environment. Inside, the
Democrats were furious.

RICHARD DURBIN, SENATOR: One page. One page of this bill. You listen to the things that they list
that they find so objectionable. They account, in dollar terms, to about one page of this bill.

RAFAEL EPSTEIN: The new President is doing what he can, writing a robust editorial and toughening
his rhetoric.

BARACK OBAMA, US PRESIDENT: The American people know that our challenges are great. They're not
expecting Democratic solutions or Republican solutions; they want American solutions.

I've said that same thing to the public and I've said that in a gesture of friendship and good will
to those who have disagreed with me on aspects of this plan. But what I have also said is don't
come to the table with the same tired arguments and worn ideas that helped to create this crisis.

RAFAEL EPSTEIN: But there is change in what the President sees as a stain on America's recent past.
The man who'll run the CIA has said torture will no longer be allowed, in particular waterboarding
where the suspect is made to feel like they're drowning. But those who did torture in the past will
not be pursued by the new administration.

LEON PANETTA, CIA CHIEF NOMINEE: I've expressed the opinion that I believe waterboarding is torture
and that it's wrong. More importantly, the President has expressed the same opinion.

Having said that, I also believe, as the President has indicated, that those individuals who
operated pursuant to a legal opinion that indicated that that was proper and legal ought not to be
prosecuted or investigated.

RAFAEL EPSTEIN: And the new administration is maintaining extraordinary rendition, where suspects
are secretly flown around the world from prison to prison but they won't be delivered to countries
that torture.

LEON PANETTA: Obviously extraordinary renditions where I think the situation where you took a
prisoner and sent him to another country for questioning and oftentimes that questioning took place
under circumstances that did not meet our tests for human values.

RAFAEL EPSTEIN: The Red Cross will now have access to any suspects held in this way. Rafael
Epstein, Lateline

Extreme bushfire alert

Extreme bushfire alert

Broadcast: 06/02/2009

Reporter: Rebecca Barrett

Emergency services in three states and the ACT are on extreme alert as severe weather conditions
create unprecedented bushfire conditions. Victorian fire authorities say tomorrow's forecast
conditions are similar to those experienced during the devastating 1983 Ash Wednesday fires.

Transcript

LEIGH SALES, PRESENTER: Emergency services in three states and the ACT are on extreme alert as
severe weather conditions create unprecedented bushfire conditions.

Victorian fire authorities say tomorrow's forecast conditions are similar to those experienced
during the devastating 1983 Ash Wednesday fires.

38 fires are burning across NSW. South Australia and the ACT are sweltering. And Melbourne's morgue
is full because of a spike in deaths blamed on the heat.

Rebecca Barrett reports.

REBECCA BARRETT, REPORTER: So far, Victoria and SA have borne the brunt of the hot weather.
Firefighters are battling a huge blaze in the Bunyip State Park in West Gippsland.

It's expected to jump containment lines tomorrow and could threaten homes. Melbourne's morgue is
now full because of a sudden spike in deaths blamed on the hot spell.

JENNIFER COATE, VICTORIAN STATE CORONER: We have had an unprecedented demand upon our services.

REBECCA BARRETT: South Australians today sweltered through 43 degrees. There were more power
blackouts and electricity supplies could be disrupted again tomorrow. Three states are now heading
for temperatures above 40 degrees. The ACT is also bracing for hot, windy conditions.

DARREN CUTRUPI, ACT EMERGENCY SERVICES AGENCY: This is certainly the worst weekend when it comes to
fire danger that we've experienced.

REBECCA BARRETT: The hot spell buckled train lines and left commuters stranded in Victoria and SA.
But that won't happen in NSW according to the Premier.

NATHAN REES, NSW PREMIER: Our systems are robust. In particular, I've asked about the rail system.
We have many more concrete sleepers and so on which mitigate against warping of lines.

REBECCA BARRETT: The Rural Fire Service is preparing for the worst.

SHANE FITZSIMMONS, NSW BUSHFIRE COMMISSIONER: Wherever you've got those dry conditions, wherever
you've got those hot conditions, you've got the recipe for fire and fire to burn quickly.

REBECCA BARRETT: There are also public health warnings.

JEREMY MCANULTY, NSW HEALTH DEPARTMENT: Be prepared. Keep cool. Keep well-hydrated. Look out for
your neighbours and your friends, particularly those who are elderly. And rest; don't go doing
strenuous exercise when it's hot.

REBECCA BARRETT: There are many ways to beat the heat on the outside and on the inside, and if it
all becomes too much, maybe it's time for a little lie-down. Rebecca Barrett, Lateline.

Tanner, Hockey discuss the week in politics

Tanner, Hockey discuss the week in politics

Broadcast: 06/02/2009

Reporter: Leigh Sales

Finance Minister Lindsay Tanner and Opposition Finance spokesman Joe Hockey join Lateline to
discuss the debate surrounding the economic stimulus package.

Transcript

LEIGH SALES, PRESENTER: According to the old cliche, a week is a long time in politics. For federal
politicians returning to Parliament for the first sitting week of the year, it probably felt like
an eternity.

The Government unveiled a $42 billion stimulus package designed to steer us through the worst
economic crisis since the Depression. The Coalition voiced its Opposition to the package in a
marathon Parliamentary all-nighter, and in doing so appeared united for the first time since the
election. And, the Prime Minister still had time to launch an all-out ideological war against the
forces of what he calls "neo-liberalism" and "unfettered free market fundamentalism".

To discuss the events of the week, I'm joined by Finance Minister Lindsay Tanner in Melbourne and
Opposition finance spokesman Joe Hockey here in Sydney. Gentlemen, welcome to both of you.

JOE HOCKEY, OPPOSITION FINANCE SPOKESMAN: Glad to be here.

LEIGH SALES: Lindsay Tanner, on 8 December last year, the Treasurer Wayne Swan said the $10 billion
economic security strategy would create 75,000 jobs and add up to 1 per cent growth. The latest
forecasts don't bear that out. How can we be sure that this second package is going to do the job
it's intended to do?

LINDSAY TANNER, FINANCE MINISTER: Leigh, that package, of course, wasn't the only thing happening
in the Australian economy over the course of December and January. We are seeing our economy being
subject to massive overwhelming negative forces. Things have deteriorated internationally much more
seriously and more quickly than most people expected and, therefore, the end result of that package
in December was to ensure that we still stayed in reasonable shape in spite of those very powerful
forces. We made a plan at the time we were prepared to act again if necessary, and it's become
clear that that's what is required. The advice from Treasury, from the International Monetary Fund,
governments all around the world are taking similar steps. Industry organisations, business
organisations like the Business Council are all supporting this action because it's necessary to
sustain jobs and to sustain economic growth and keep as many businesses as possible in business in
this country.

LEIGH SALES: Joe Hockey?

JOE HOCKEY: Well, I think what we're seeing is a debt and deficit spiral and the Government doesn't
know just where it's all heading. Unfortunately, they're getting all their spin wrong. What they
said in December was that by spending $10 billion, they would create 75,000 jobs. Now they're
spending four times as much and they're losing 300,000 jobs and, they say, saving or holding onto
90,000 others. So, it's a huge amount of money. And our concern is that they've lost focus, they've
got no direction, they've got no plan to get us out of the problems ahead.

LEIGH SALES: Joe Hockey, the Government's stimulus package follows the advice of the IMF to a tee.
It's won the broad support of business unions and the Treasury, yet the Opposition's decided not to
vote for it. What evidence or advice did you rely on in making that decision?

JOE HOCKEY: Well, we have a range of sources of advice.

LEIGH SALES: And who are they?

JOE HOCKEY: Well, I mean - you know, some of them probably wouldn't want to be identified, others
I'm sure probably would. But, we had a range of sources of advice.

LINDSAY TANNER: Milton Freeman, Arthur Laffer, John Taylor ...

JOE HOCKEY: Well, you know, what, we actually have - the best information we have is that which we
harnessed from being 10 years in government, last paying off $96 billion of Labor government debt,
leaving the country with net assets of $70 billion, leaving the country with a government that was
debt-free, leaving the Labor Party, unfortunately, with a $20 billion surplus. Now, that wisdom and
experience that we gained in government, last paying off the Labor Party's debt, made us have a
second look at what the Labor Party was doing and we went, "Enough. This is crazy. This is bad.
It's too big. It's bad spending."

LEIGH SALES: OK, but that was now a long time ago, a number of years ago. As I said before, the IMF
backs their position, business in Australia broadly backs their position. Just give me one body
that has given you advice or backs your position.

JOE HOCKEY: Well, I'll tell you who backs our position, the next generation of Australians that are
now going to have to pay off $200 billion of Labor Party debt and rising with an asterisk next to
it.

LINDSAY TANNER: Not correct.

JOE HOCKEY: Well, can I tell you, mate, it's emerging at the moment that the state governments are
going to have to borrow $60 billion. $60 billion. That's over the next two years, that we can see.
Not four years, two years. That's on top of your concession - Lindsay Tanner's concession during
the week, that, well, the total credit card limit for Australia has to be increased from $75
billion to $200 billion. And we found out late last night in the Senate inquiry that in fact that
$200 billion is already accounted for in new borrowings by the Commonwealth. So you add all that up
and it's just a phenomenal amount of money. It took us 10 years to pay off $100 billion of Labor
debt. How long will it take to pay off $200 billion debt?

LINDSAY TANNER: Leigh, this is all grossly misleading, absolutely misleading. Because what it
ignores is financial assets on the other side of the ledger. The Federal Government is both a
borrower and a lender and we have been in what's been called negative net debt; in other words,
more people owe money to the government than the government owes money. These effects, these
circumstances, because of the huge hole in government revenue that has been blown by the global
financial crisis, are pushing us into the need for borrowing and going into actual debt. But the
real amount of debt that's projected is about $70 billion because there are substantial assets on
the other side of the ledger. We have to have the capacity to borrow, yes, but we also ...

JOE HOCKEY: What are those assets, Lindsay? What are the assets?

LINDSAY TANNER: Those assets are in the Future Fund, HECS debt, assets that will flow from the
involvement in the commercial property vehicle, for example. So there is very substantial ...

JOE HOCKEY: But that commercial property, $30 billion is not even in the $200 billion.

LINDSAY TANNER: That's because it is not gonna be a loan-based vehicle and because that is only a
contingency.

JOE HOCKEY: There you go, yeah.

LINDSAY TANNER: So, the Opposition is grossly exaggerating these circumstances, Leigh. Let me tell
you where the projected debt level will hit in three years time. It will hit exactly the same level
that prevailed in 2001/2002 - seven years ago, halfway through the term of the Howard Government.
It will hit about 5 per cent of our total economy. The average it costs the developed world is 45
per cent and it's rising rapidly. We are still gonna be one of the lowest debt countries in the
world. That level of debt was sustainable and manageable in 2001/2002. It will be sustainable and
manageable in 2011/12.

LEIGH SALES: Alright, let me pick up on a point that Lindsay Tanner made there where he spoke about
the need to go into debt. Joe Hockey, your side of politics has been painting deficits as
inherently evil and surpluses as inherently good, but economists say deficits are a perfectly valid
tool to use at a time of economic downturn. With Australians already very worried, do you need to
scare them further about deficits?

JOE HOCKEY: Oh, talk about scaring. Kevin Rudd had three press conferences to talk about ...

LEIGH SALES: No, no, I'm asking about what you're doing. We'll talk about them in a minute, but I'm
asking about what you're doing in terms of this scare campaign about deficits.

JOE HOCKEY: No, no, well, you know what, we stand for surplus budgets because we delivered surplus
budgets. We well remember the Labor Party opposing us at every turn when we tried to get the budget
into surplus.

LINDSAY TANNER: Complete rubbish.

LEIGH SALES: So are you saying that the economic principle of using a deficit at a time of downturn
is wrong, is invalid?

JOE HOCKEY: No, no, no, not at all. In fact we had a deficit when seven out of our top 10 trading
partners were in a recession.

LINDSAY TANNER: And you're accepting a deficit now. You're leader's accepted there's gonna be a
deficit now.

LEIGH SALES: But we're now about to have six out of 10.

JOE HOCKEY: If I can just finish, if I can just finish. We accept that there will be times when you
have a deficit, but you've got to have a plan to get out of that deficit and to pay the debt. And
the thing is that the Labor Party now is just saying, "Spend, spend, spend," but they're not
telling us how on earth they are going to get out of this massive, not only structural deficit,
because that's what they're leaving us with, but a massive debt bill - that's our problem with what
they're doing. And it's very frustrating for us. I mean, it's frustrating for us to see all the
work of 10 years blown in 12 months.

LEIGH SALES: Lindsay Tanner?

LINDSAY TANNER: Leigh, this is about ensuring that we protect jobs, that we protect economic
growth, that we keep businesses operating and that we keep our economy moving forward - positive
growth. That's what this is all about. And if we don't do that, we'll have bigger deficits and
we'll have longer time to pay off ever-mounting debt. We have got to keep the growth going 'cause
that delivers stronger tax revenues. And Joe is quite wrong, we do have a specific plan that was
made public as part of all of this package about returning to surplus. And that sets three clear
rules for us: as soon as growth resumes at its normal level, normal trend level, then we are
required to not increase spending by more than 2 per cent in real terms per year, to offset new
spending proposals by savings and to allow tax revenue to grow up to the level that we committed to
maintain it no higher than which is the level we inherited from our predecessors as a proportion of
the economy. So we have got a clear pathway to get back into surplus. What the Liberal Party
haven't got is any kind of commitment for jobs and small businesses and the economic activity in
this country. That's what's crucial now. That's what we're fighting. That's what governments around
the world are fighting to protect and to sustain.

LEIGH SALES: OK. I asked Joe Hockey about scaring people; let me ask you about the same thing. The
Government was painting daily a gloomier and gloomier picture of the economy in the lead-up to the
announcement about your stimulus package on Tuesday. Isn't it entirely possible that this
undermined confidence further and made people even more anxious, encouraging them to save rather
than spend?

LINDSAY TANNER: Look, I don't believe so, Leigh. We have to walk a very fine line here. We have to
be honest with the Australian people. That's why we had to announce that we'd received advice from
Treasury that there were radical revisions in tax revenues within months of significant revisions
of course that occurred in November. Now, imagine the criticism had we sat on that advice and said,
"Look, we're not gonna tell anybody because it's too scary."

LEIGH SALES: But did it require daily announcements in the lead-up to that stimulus announcement
about the gloomy picture?

LINDSAY TANNER: Well, I don't think we've had daily announcements from the Government.

LEIGH SALES: I think we actually have.

LINDSAY TANNER: We've had an obligation to be honest and open with the Australian people, but also,
you're quite right, we have an obligation to talk up the prospects of getting through this. I've
been doing that all the time, so have my colleagues. We understand that confidence is central to
this, but so's frankness, so's honesty. So we've gotta meet a very delicate balance there. I
believe we're doing that. But I am absolutely firmly committed to Australian businesses and
Australian workplaces getting back into strong growth. I believe that'll happen. I believe that the
character, the strength, the innovation, the creativity that's innate in this country, that's
innate in our workforce, that's innate in our businesses will see us through. But we've gotta be
realistic about the challenges we're facing.

LEIGH SALES: Mr Tanner, if the global economic situation worsens, as the IMF is warning may do,
what's left in the cupboard to deal with that? Have you, as the Opposition has advised you to do,
left something up your sleeve?

LINDSAY TANNER: We've made it plain all the way through that if further action is required, then we
stand ready to take that action. Clearly, we've put on the table a very substantial stimulus
package. It works out at about 2 per cent of gross domestic product of our total economy for the
course of this year. That's serious. That's similar, maybe a bit smaller in some cases, to what's
happening in many other countries around the world. Clearly, we'll be re-examining all of the
situation between now and the Budget. We've got to put a Budget together for May. We stand ready
for further action if and when required. But all of the parameters are in play. The level of the
deficit, tax receipts, spending, the debt levels - all of these issues will be under constant
examination. But the critical thing - I reiterate: the critical thing is sustaining and supporting
jobs in our economy and sustaining and supporting our businesses.

LEIGH SALES: Alright.

LINDSAY TANNER: That's what'll see us through. If we just sit back as Julie Bishop the Shadow
Treasurer suggested the other day, sit back and see what happens, then that's a recipe for
disaster.

JOE HOCKEY: She didn't do that; that's wrong. That's just dead wrong, Lindsay.

LEIGH SALES: She was quoted in the paper as saying that we should sit and wait and see how things
unfold.

JOE HOCKEY: Well, there's one thing to suggest, as Lindsay is, that she said sit back, but it's
also time to be cautious, to look carefully at the indicators. You know what ...

LEIGH SALES: That's actually inconsistent with the advice of the IMF which said it's better to act
sooner rather than later.

JOE HOCKEY: Well, you know, the IMF gives lots of advice. There was someone from the IMF that also
said that one of the best stimulus - one of the best stimulants you could have for the economy is
tax cuts. The Labor Party conveniently forgot that advice from the IMF. But, you know, the thing is
you've got to be cautious about spending money and you've got to be cautious about going into a
substantial deficit, because you know what, it's damn hard to get out of it. And the Labor Party
has no real experience in getting out of massive deficits, except when Paul Keating said we were
becoming a "banana republic" back in the mid-'80s, when the current account deficit blew out, he
had to dramatically turn around from being - running a deficit into a surplus. These guys, if our
current account completely, you know, disintegrates and we have a massive current account deficit,
these guys have no capacity to get the budget back into surplus without a dramatic negative impact
right across the Australian community. And I'd just ask Lindsay Tanner the question: what will you
do if the current account deficit deteriorates? What action can you take?

LEIGH SALES: Lindsay Tanner?

LINDSAY TANNER: Well, Joe, I think you better learn some economic history because in the
circumstances that prevailed in the mid-1980s, growth was running strongly and that's when you get
big current account deficits. We inherited a very big current account deficit verging on around 6
per cent of GDP from your government. And, to be fair, it was when growth ...

JOE HOCKEY: It was never at 6 per cent of GDP. That's - never, no.

LINDSAY TANNER: Yes it was. Yes it was. Yes it was. And to be fair, that's typically associated
with growth running very strongly, the mining boom had really pumped up growth. It is now projected
to fall to about 3.5 per cent within a couple of years. So, I can tell you that if we get a current
account deficit returning to the levels that you're talking about, then that will be because we've
had an extended run of substantial increases in economic growth. So the kind of scenario you're
presenting here is just simply not gonna occur in the foreseeable future.

LEIGH SALES: OK, let me move us on. Let me move us on. I wanna touch on a few more issues before we
run out of time. Joe Hockey, it's starting to look as though Malcolm Turnbull thinks the next
election will be about deficit and debt. Kevin Rudd's banking on it being about jobs. Don't jobs
trump deficit every time in most people's minds?

JOE HOCKEY: Well, no, it is about debt and jobs. I mean, what defines the next election is usually
determined during the course of the election campaign, if not just before. And - but, you know,
this isn't - we know what we are doing is not going to be politically popular. You know, we're
going to suffer a hit in the polls, it's pretty obvious. Saying to people, "Look, we don't think
it's time for you to get $950 from the Government," is - you know, they describe it as a courageous
political decision, and it is.

LEIGH SALES: So it's a high-risk strategy?

JOE HOCKEY: Well, but it's not about the politics of it, it's about the principle.

LEIGH SALES: It's always about the politics of it on some level.

JOE HOCKEY: Well, from our perspective, we looked at what the Labor Party is doing and we said it's
just dead wrong. It's too big and it's badly spent and someone has to stand up, not just for the
taxpayers of today, but for the poor sods that are gonna have to pay this deficit and debt off for
many years to come.

LEIGH SALES: Lindsay Tanner, in October, 2007, then Treasurer Peter Costello warned of a huge
tsunami set to engulf global financial markets saying that the breakneck pace of the Chinese growth
couldn't continue and that the US economy would be severely buffeted by the sub-prime crisis. He
was the sole Australian politician to have that foresight. Wouldn't we all be better off now if he
were running the economy?

LINDSAY TANNER: Leigh, I think I'd remind you that had any of us in Opposition made statements like
that, we would have been pilloried. We have to be very careful as political leaders, but
particularly in Opposition. You don't get the kind of leeway to make those kind of speculations.
And I'd also suggest to you that that was a convenient message to talk up the Government's
credentials for being the ones to handle that crisis that he was projecting. So, I don't think you
should put too much emphasis on those comments. And he wasn't the only person around the world
suggesting that we were in for serious problems. Particularly, the subprime crisis had started
round about July/August of that year and people make these kind of predictions all the time. And
what happens is of course that the ones that were wrong or miscued are often forgotten, the ones
that appear to be accurate sometimes get overstated. So, yes, Peter Costello made those statements,
but I'd also point to some of his track record as the Treasurer. And, in fact, the vulnerabilities
that Australia now has, like a very big current account deficit, like lack of investment in
infrastructure over 10 or 11 years all happened on his watch.

LEIGH SALES: They also had a very big surplus that they left you with that allowed you to raid to
do this stimulus package.

LINDSAY TANNER: So, to suggest that he is now somehow the solution.

JOE HOCKEY: Lindsay's now channelling Kevin Rudd. It's all the neo-liberals, right? It's all the
neo-liberals.

LINDSAY TANNER: When Australia was being drowned in money in the mining boom, the question the
Australian people were asking was, "What investment are we getting for the future of our kids out
of this money?" And the answer was: virtually nothing. Nothing on broadband, no reinvestment in our
schools or universities, no investment in our health system. And that's the legacy that Peter
Costello and John Howard left this nation. We're now trying to deal with that.

LEIGH SALES: Joe Hockey, one quick question to you before we go. Peter Costello has certainly had
more to say on this issue in the past week than your current Treasury spokesman Julie Bishop. Will
voters take your side seriously while your best batsman won't come out of the dressing room,
officially?

JOE HOCKEY: Well, can I tell you he's been very much in the middle of the playing field in the last
week.

LEIGH SALES: He's not on the frontbench.

JOE HOCKEY: Well, he's as frustrated as everyone who worked really hard to create a surplus, to
leave the country debt-free. He and all of us are frustrated at seeing the Labor Party going to the
old spirit of spend, spend, spend, don't worry about tomorrow. I mean, these guys are giving
drunken sailors a bad name. I mean, they are seriously going hell for leather on the accelerator
without any regard for the future impact. And Peter Costello, Julie Bishop, Malcolm Turnbull, Joe
Hockey - the whole team is incredibly frustrated at what these guys are up to.

LEIGH SALES: We are out of time. Joe Hockey, Lindsay Tanner, thanks very much for coming in to talk
to us on what's been a very busy week.

JOE HOCKEY: Great pleasure.

LINDSAY TANNER: Thanks very much, Leigh.

Lateline obtains corporate video from Storm Financial's glory days

Lateline obtains corporate video from Storm Financial's glory days

Broadcast: 06/02/2009

Reporter: Conor Duffy

One of the toughest stories of hardship since the global financial crisis hit last year has been
the collapse of Storm Financial. But at the peak of the boom it was a different story - Lateline
has obtained a corporate video showing favoured Storm clients enjoying a first class European
holiday

Transcript

LEIGH SALES, PRESENTER: Of all the bad news in Australia since the global financial crisis hit last
year, one of the toughest stories of hardship has been the collapse of Storm Financial. With the
financial planning business going into administration, many of its 14,500 clients now stand to lose
their life savings.

But at the peak of the boom it was a different story. Lateline has obtained a corporate video
showing favoured Storm clients enjoying a first-class European holiday. Conor Duffy reports.

EMMANUEL CASSIMATIS, STORM CO-FOUNDER: It was a bunch of good people, more than 400 Storm clients,
some staff, all having the most fantastic time of our lives. It was exquisite.

CONOR DUFFY, REPORTER: In May, 2007, Storm Financial's co-founders Emmanuel and Julie Cassimatis
took favoured clients on the holiday of a lifetime. It included a dinner and dance party at a 15th
Century castle with a private performance by Tina Arena.

EMMANUEL CASSIMATIS: Entertainers - great. Tina Arena - fantastic. Standing ovation.

CONOR DUFFY: These days, large groups of Storm clients are more likely to gather in halls to
discuss who is to blame for the loss of their homes and life savings.

EMMANUEL CASSIMATIS: How does it feel to know that our advice has ruined these thousands of
people's lives? Look, that, the wording of your question has an embedded assumption and that is
that the advice ruined them. Our advice did not ruin anybody. It's the actions of individuals and
corporations in the worst crisis in history that precipitated that.

CONOR DUFFY: Lyn Murray from the NSW South Coast couldn't disagree more. She joined Storm when the
company bought out her financial planner. Ms Murray says her investment plan became much more
aggressive. Her house was mortgaged and the proceeds used to get a margin loan.

LYN MURRAY, STORM CLIENT: My margin loan started off at $400,000 and within just over 18 months, it
was basically up to the $800,000s.

CONOR DUFFY: And that was Storm continually telling you to up the amount that you were investing?

LYN MURRAY: Correct.

CONOR DUFFY: And to borrow to do so?

LYN MURRAY: Correct.

CONOR DUFFY: Now Lyn Murray is losing the home she loves.

LYN MURRAY: I must say, the last sort of eight months have been just horrific, really.

CONOR DUFFY: Critics have said that the Storm model was flawed because it left investors so heavily
geared they had no hope of servicing their debts during a long share market fall.

EMMANUEL CASSIMATIS: I don't think so. That the proof at that is that we've had decades where it
has worked beautifully.

CONOR DUFFY: Storm's co-founder, Emmanuel Cassimatis, says the blame for the company's collapse
lies with the Commonwealth Bank and he says he's now on a crusade to get as much money back for
Storm clients as he can.

EMMANUEL CASSIMATIS: The moral responsibility is absolute. I mean, we have people out there that
are bleeding and till the moment I draw my last breath, we are going to work as hard as we can. I
am going to work as hard as I possibly can to find justice for all of these individuals.

CONOR DUFFY: But all along, the CBA has said that Storm was responsible for the advice it gave its
clients and has called for an investigation. And Lyn Murray says she was constantly reassured by
Storm Financial that everything would be fine, even as she was watching the value of her investment
plummet.

LYN MURRAY: It has just been six months of just sheer and utter hell, honestly - sheer and utter
hell. It was like being on the Titanic and I was one of the people that couldn't get a life guard -
a lifeboat, sorry, a lifeboat. I just had to wait for the ship to go down and I didn't understand
why they couldn't sell me up.

CONOR DUFFY: Storm Financial's relationship with the banks was once much rosier. Emmanuel
Cassimatis says that in 2007, Macquarie Bank, Challenger and CBA subsidiary Colonial chipped in
about $200,000 which he used to sponsor events on the European holiday. Now, Macquarie Bank is
charging Lyn Murray a break fee of more than $16,000 to pay out her margin loan before it's due to
expire. She says the fee is unfair and will make it harder for her to get a fair price for her
house.

LYN MURRAY: It gives me five more months of living in this house until hopefully the market picks
up and I can get what the house is actually worth, rather than a fire sale. So, yes, it's very
important to me. It means an awful lot, really.

CONOR DUFFY: The Commonwealth Bank is also charging distressed Storm clients break fees. Both banks
have defended the charges, saying they're not making a profit on them. That's not much consolation
for Lyn Murray who received an $8,000 loan from Storm to help with expenses. It's not enough to
keep her going, and like hundreds, possibly thousands of other Storm clients, she and her son
Michael Shannon are looking at some tough options, including living in her son's shed.

Emmanuel Cassimatis says he's also lost everything and he insists that not a single Storm client
would have lost their homes if he'd been able to keep advising them.

EMMANUEL CASSIMATIS: Even now, as I get calls from clients and I'm not in a position to be able to
advise them, I know fully well what they should be doing and I know fully well how they can
manoeuvre themselves back into a better position.

CONOR DUFFY: The number of Storm clients that lose their houses could end up being in the
thousands. Conor Duffy, Lateline.

Stephen Long discusses the RBA's economic forecast

Stephen Long discusses the RBA's economic forecast

Broadcast: 06/02/2009

Reporter: Stephen Long

Economics correspondent Stephen Long joins Lateline to discuss the Reserve Bank's forecast for the
Australian economy; it now expects barely any growth at all this year. But it is putting its faith
in the combination of huge rate cuts and a massive Government stimulus to keep recession at bay.

Transcript

LEIGH SALES, PRESENTER: The Reserve Bank today slashed its forecasts for the Australian economy. It
now expects barely any growth at all this year, but it's putting its faith in the combination of
huge rate cuts and a massive Government stimulus to keep recession at bay.

Joining me to discuss this is economics correspondent Stephen Long. Stephen, welcome back.

STEPHEN LONG, ECONOMICS CORRESPONDENT: Thanks, Leigh.

LEIGH SALES: So how steep is the cut to the growth forecast?

STEPHEN LONG: Well the growth forecasts have gone off a cliff just as growth around the world has
gone off the cliff. In the last three months of last year, the top seven economies in the world
suffered the biggest fall in growth ever recorded. And, naturally enough, that's hit Australia so
the Reserve Bank has gone from forecasting nearly two per cent growth in the year to the middle of
2009, the fiscal year, down to just a quarter of a per cent. And, Leigh, in the non-farm economy,
which is where of course most of us live and work, they're looking at zero growth - no growth at
all, the economy just standing still. And that factors in this massive $42 billion stimulus
package. They've put that in in making those calculations.

LEIGH SALES: So, the big question: is there faith in this stimulus package justified?

STEPHEN LONG: It's a lot of money and it obviously will contribute positively to economic growth.
But here's the rub and here's my suspicion: look at the $12.7 billion in handouts to individuals
and families. Well, given that we have had the biggest credit bubble in the history of the world
and Australians have binged on debt as people did overseas, and now they've stared into the abyss
with this slow-moving train wreck around the world and looming recession, won't a lot of people use
that money to pay down debt and to increase their savings rather than spending it on consumer goods
that really aren't going to do them a whole lot of good in terms of making more money or wealth?
That is what I think is highly likely. And there's a few stats to put that in context. If you look
at the last recession and the level of debt to disposable income, it was a fraction of what it is
now. The level of debt to disposable income is more than three times as high as it was during the
last recession. And even after the huge rate cuts we saw last year, you still have a situation
where Australians, on average, are making interest payments that take up more than twice the level
of income than they did during the last recession - 15 per cent. So, I reckon a lot of people will
actually use this money to pay down debt rather than spending it, which will put a big knock in the
growth.

LEIGH SALES: There's a big incentive to do so given, you know, the figures that you outline there.
When Kevin Rudd announced his stimulus package this week, he said that six out of 10 of Australia's
major trading partners are in recession. What's the practical effect of that?

STEPHEN LONG: Well, it's a huge hit to Australia's exports and our national income. There has been
an unprecedented fall in industrial output and trade in east Asia. In Japan, one of Australia's
biggest trading partners, if not the biggest, you have a situation where output is at 1985 levels.
And so, that's going to hit Australia very, very hard, Leigh.

LEIGH SALES: Stephen, thanks very much, we'll see you next week.

STEPHEN LONG: Look forward to it.

Now to the weather: That's all from us. If you'd like to look back at tonight's discussion with
Lindsay Tanner and Joe Hockey or review any of Lateline's stories or transcripts you can visit our
website at abc.net.au/Lateline. Tony Jones will be here on Monday with the '7.30 Report' and I'll
see you again from next Wednesday. Goodnight.