Topics: Trump’s comments on Iran war, Strait of Hormuz, IMF warning

STEVE PRICE: In the Middle East, the situation there. Donald Trump says the Iran war could be nearing a turning point, talks possibly restarting. Joe just mentioned that within days. And the US says the blockade has effectively shut down the maritime trade into and out of Iran. Here's Donald Trump telling Fox News he believes the war could be over very soon.

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[CLIP STARTS]

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MARIA BARTIROMO: You keep saying was. Is this war over?

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DONALD TRUMP: I think it's close to over. Yeah, I mean, I view it as very close to over. You know what? If I pulled up stakes right now, it would take them 20 years to rebuild that country. And we're not finished. We'll see what happens. I think they want to make a deal very badly.

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[CLIP ENDS]

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STEVE PRICE: I'm not sure we feel that optimistic about it ending soon. Joining me, Liberal Senator Dave Sharma. Great to catch up with you. If Donald Trump thinks the war is close to over, is that overconfidence? Real? Premature? Is he kidding himself?

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DAVE SHARMA: Look, I think it depends what you mean by the war being over, but I think it's quite feasible that hostilities will not be resumed. Now, does that end with a formal diplomatic agreement or is it more like an armistice, if you like, a sort of non-aggression agreement which perhaps allows the Strait of Hormuz to be reopened. Then I think that's quite feasible. But, obviously there's a two-week ceasefire which still remains largely in effect. Obviously, the United States has put a blockade now, but the fighting we saw before the talks on the weekend has not resumed.

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STEVE PRICE: So, you know that region really well. I mean, that naval blockade and what they've said they will do is prevent shipping going in and out of Iranian ports. That seems to be holding. I mean, the worst of all outcomes would be some attack on a US naval ship there, but that doesn't seem to have happened either. It seems like it's slowly reopening, but for us here in Australia, Dave, that's going to mean we're going to have a very long tail on the fuel crisis that we currently find ourselves in the middle of.

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DAVE SHARMA: Look, I think that's right. I think all of this has got a long tail. I mean, normally about 20 million barrels of oil a day pass through the Strait of Hormuz. And like it's been in the last month, it's been somewhere around 2 to 4 million barrels a day. But obviously there's also urea. There's helium, there's all sorts of goods. It's going to take quite a long time to basically clear that backlog of shipping and for production facilities to restart, like Qatar's LNG facilities, some of the other oil and gas extraction facilities. But I would say what this blockade has done, I mean, Iran up until this point has basically been a beneficiary of the closure of the Strait of Hormuz because no one else is getting their oil out. They were still getting 2 million barrels a day, give take or out and selling it at premium prices, basically. So as far as they were concerned, closure of the Strait of Hormuz was a net economic positive. What this US blockade does is make sure that they wear the pain of the closure as well.

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STEVE PRICE: Put your diplomatic hat on and a region you know very well, the Lebanese-Israeli border. There are now talks about whether the Lebanese want Hezbollah out of Lebanon, and there's talks between the Israelis and the Lebanese. Is that a reality that they could somehow get Hezbollah— how would you get Hezbollah out of that entrenched position they have where they're, I mean, they retreated into Beirut, we know, but how would you ever get them out of the country completely?

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DAVE SHARMA: Look, I think it'd be a case where you sort of gradually marginalize them and diminish them as a force, a bit like Islamic State was defeated, if you like, in Syria and Iraq. It wasn't all at once and everyone didn't leave. But people bled back into the surrounds. People changed their views. People left a dying cause. I could see Hezbollah becoming like that. And look, my read is that the majority of Lebanese people do not want their country held hostage by Hezbollah anymore. They want to get back to a normal country with a normal set of governance arrangements where they're not captured by a terrorist organization and we saw talks just yesterday between Israel and Lebanon broken by the United States. We haven't seen direct negotiations between those two countries in over 30 years. So this is quite a momentous time potentially for making that relationship between Israel and Lebanon normal.

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STEVE PRICE: Back on domestic politics, we were talking there with Michael Kroger about Jim Chalmers and what might or might not be in the May budget, cost of living. Help? Do you think that they have the money there to actually do that? And are you fearful, like I am, that there will be some tax increases or some charge increases on people because the budget is in such poor shape and we're in the middle of a crisis?

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DAVE SHARMA: I don't think the government has the fiscal space or the headroom, if you like, to do this. Because rather than using the relatively benign last 2 or 3 years of high government revenues, stable macroeconomic conditions to improve the budget bottom line, all this government has done is, is spend and spend and spend. So we've got spending growing in the last budget, government spending growing 4 times the rate of the economy. We've got government debt about to hit a record $1 trillion. So if the government now decides to pour more money into cost of living relief, that's going to add to government debt, but it's also going to further fuel inflation. I mean, inflation before we came to this Middle East shock was running at 3.7% in Australia, much higher than the developed world. We're now going to have the impact of this shock from the Iran war. If the government then starts putting more money into the economy, inflation's going to rise even further and we all end up worse off in that situation.

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STEVE PRICE: Well, the IMF has clearly pointed the finger at the government and said, you got to stop spending. I mean, they've said broad relief would just make inflation worse. Labor, are they likely to pay any attention to what the IMF is saying to them?

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DAVE SHARMA: I don't think they've shown any desire today to run an economically responsible fiscal policy. Everything for them has been through a political lens. How do we alleviate some pressure here or woo some voters here rather than what's in Australia's best national interest? So, no, I don't think they're likely to pay much heed to them. I think the only thing that they do pay into is the Reserve Bank continually putting up interest rates because they've been left with no choice. And the reaction of financial markets and bond markets.

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STEVE PRICE: Wasn't surprising today they wheeled out Tony Burke to try and monster Angus Taylor on your party's tougher migration crackdown. The policy itself, what's your assessment on what we are actually able to do? I mean, this idea of an Australian values test, does that cut the mustard, do you think? I mean, what exactly is that?

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DAVE SHARMA: Well, look, at the moment when you become a citizen in Australia, you sign up to a set of Australian values. What this would do is when you, when you get permanent residency or a work visa or a longer-term one, you, you're basically also signing up to respect those as you would be if you're a citizen. But it could be made a condition of your visa that if you breach those values through a criminal act or some other egregious act, then your visa can be revoked. Now, there’s broad discretion that's available to the minister now to cancel visas and to revoke visas. But the truth is, I don't think he's been doing that except in response to political and media pressure. If we enshrine Australian values and there's at least a set of tests and a set of standards that the minister can point to and enforce, if we get instances of these sort of hate preachers who turn up in Australia on a speaking tour and instead seek to demonise one particular group of Australians. It will allow us to have stronger tools to deal with that.

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STEVE PRICE: Just briefly, I know you haven't put a number on it, but do raw numbers need to come down?

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DAVE SHARMA: Yes, I think that's undoubtedly true. I mean, first 2 years of Labor we saw about a million— net overseas migration was about a million cumulatively. Now, at the moment, Australia's population is growing 2/3 from migration and 1/3 only from natural increase. That's a very unusual kind of balance, if you like. And our migration intake per capita is much higher than the United States, the UK, or Canada. And I think we're all feeling the strain of that infrastructure, of housing affordability and availability, all of those issues.

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STEVE PRICE: Dave Sharma, always good to catch up. Thank you very much for joining us tonight.

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