The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

10 October 2008

Interview with Marius Benson

ABC News Radio

10 October 2008

SUBJECTS: US Financial Crisis, Interest Rates, G20 Meeting

BENSON:

Wayne Swan, you've just been visiting the New York Stock Exchange and the Dow has closed down again – down 7.3%. There's just no sign of this crisis easing.

TREASURER:

Well, Marius, I think there is a rocky road ahead. There's no doubt about that. The positions put in place by the American Government in recent weeks and days are certainly welcome. But there's no magic bullet here, no magic solution. Those proposals will take some time to be implemented and to work over time. So, I think that means, as the report from the IMF shows, that growth for the developed world is going to slow considerably in the period ahead, and of course, that will affect the developing world as well.

BENSON:

Just looking at the present crisis, this is a financial crisis, but the solution doesn't seem to be money. Trillions of dollars are being thrown in by governments around the world but they just can't buy confidence. There's not the confidence there for people to invest and lend.

TREASURER:

There's no doubt that confidence is the key, and of course, being here at the epicentre of this global firestorm in New York, I guess, just underscores the key challenge – and the key challenge is to restore confidence, to restore confidence on a global basis, and of course, that requires global solutions.

BENSON:

And what will the solutions being looked at by the G20 meeting over the weekend? What sort of solutions are going to be considered if money doesn't work?

TREASURER:

Well, can I just say it's a very good thing that the G20 meeting has been called for the weekend. This is something that both the Prime Minister and myself have been lobbying for for a long period of time. In April we expressed the view at the IMF that involvement of the G20 is very important, because to date the global solution has been in the hands of the G7, and the G7 does not necessarily include any of the developing countries around the world that are very important to the future of the world economy. So, broadening out this discussion to the G20 is really important because the G20, I think, working with the IMF, can help put in place the architecture that is essential to ensure that these events don't happen again. But of course, I think the G20 meeting this weekend, this Saturday afternoon, will probably, in the first instance, concentrate on more immediate solutions.

BENSON:

But can the G20 do something that the G7 didn't? I mean, we have seen an enormous level, an unprecedented level, of coordination around the world, when you saw every government, every significant government, seemingly cutting interest rates in a coordinated way and not affecting the crisis, seemingly.

TREASURER:

Well, I think we're going to need coordinated action across a range of areas and it won't just involve interest rates. It will also involve some of those issues that have been on the agenda for some time. But of course, the immediate problem here is the availability of liquidity, and I think that will be firmly on the agenda. As I've met with people from the banking sector this morning and other people involved with this crisis, the lack of confidence is not encouraging people to lend, and what that is doing is putting a real credit crunch in place which is stopping activity, or restricting activity, in the real economy.

BENSON:

And specifically, what will Australia, what will you be proposing at the G20?

TREASURER:

I've yet to see the agenda for the G20 meeting. But we will be talking about the need for there to be concerted action for countries, both developed and developing, to work together. That certainly hasn't happened at this stage. And when it comes to the developed countries, it's very important that they all sing from the same song book. I don't think that's really been happening to the extent that is required at the moment.

BENSON:

How concerned are you about Australia's exposure to these global actions? For example, there's the specific concern about Iceland, which seems an unlikely epicentre of this crisis, the institutions in Iceland being in collapse and that causing specific problems in Australia? Are you concerned on that front?

TREASURER:

Australia's not immune from the fallout of this global financial upheaval. We are certainly better placed that many other countries in the world to handle that fallout but we're not immune from it. Whether it is Iceland or whether it is what is going on in Germany or what's going on in Great Britain, or more particularly what's happening in the US, what we do need is the regulatory authorities, the central banks, as well as the political leadership across all of those countries, to be acting together. That's why the G20 meeting is so important. We've not had those leaders together in the room talking about this before. But I can't pre-empt the agenda of the G20 Finance Ministers' meeting. What I can say is it's an important step because such a meeting on this topic has not yet occurred.

BENSON:

And broadly in summary, is it safe to say things are going to get worse before they get better?

TREASURER:

Marius, I think there is a rocky road ahead but some of the foundations for a solution have been put in place. They've been put in place in the US. They've been put in place in Europe. And of course, as you know, the Rudd Government at home has been working to strengthen our financial systems and to put in place the sort of budget settings we need to cope with the international uncertainty.

BENSON:

Wayne Swan, I'll leave it there. Thank you very much.

TREASURER:

Good to talk to you, Marius.