Sometimes you have to wonder if Joe Hockey, the putative federal treasurer if the Gillard mob loses power, really has a handle on what’s going on.

AAP quoted him this morning: “Australia has a good long-term future but from my own perspective, I’d be reducing government expenditure, I’d be paying down debt as quickly as possible,” he told ABC Radio on Friday.

He said that more than $150 billion of the government’s debt was held by offshore investors who could dump their investment quickly in a financial crisis: “Australia is a massive importer of money and just as the financial crisis hit our banks last time, there is the capacity for similar events to hit us again.”

Now isn’t the federal government paying down that debt as quickly as possible?

Well, if Joe knew his onions, he would realise that far from selling Australian debt, foreigners have been buying it with their ears pinned back in the past couple of months. In fact the key indicator, the yield on 10-year Treasury bonds was yielding 4.54% this morning, well under the cash rate of 4.75%.

That’s the lowest the yield has been since 2002.

And if Joe really knew his onions, he would also understand that bond yields fall as prices rise: so bond yields have fallen from 5.67% at the end of last December, or more than 1%. And bond prices rise (like share prices), because there are more buyers than sellers: in other words demand is greater than supply.

Remember how Joe and his mate Tony think that all that debt issued by the federal government is bad because it is crowding out other borrowers. Well many of the purchasers of that debt are based offshore and want a “safe haven” compared to the euro and the US dollar.

But the fall in yields has been happening now for several months and as foreign central banks and sovereign wealth funds reportedly buy Australian debt to diversify their holdings away from US government bonds and notes.

So the federal government should keep as much debt on issue as possible (it will have to because the move back into surplus by 2013 is looking dodgier by the week).

Them foreigners want as much as they can get. They think Australian government debt is safer than the US and most European governments, unlike Joe and Tony.