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

16 October 2011

Interview with David Tweed

Bloomberg TV

Paris

16 October 2011

SUBJECTS: G20 Finance Ministers Meeting; global outlook; Australian economy

TWEED:

Treasurer, what was identified as the biggest risk to world growth by the G20 and what was the message?

TREASURER:

I think all the eyes of the world will be on the European leaders on October 23. The time for half measures is over. The time for action is here. So people will be looking for a comprehensive plan on October 23 because you've got two of the big economic engines in the global economy misfiring and we certainly need a comprehensive plan out of European leaders.

TWEED:

That October 23, that's the EU Summit. Is that an absolute deadline or is the deadline going to be the G20 leaders meeting at the beginning of November?

TREASURER:

Well, that's a deadline that the European leaders set themselves but of course this is an issue - the sovereign debt crisis in Europe – that has been going on for 18 months. That's why I say the time for half measures is over. The time for action is now. That's the timetable the European leaders have put forward but of course what we've been working on here is important work for the leaders summit in Cannes. That's going to be very important for the future, in particular to deal with the long-term challenges in the global economy.

TWEED:

Well just quickly returning to the Europeans, just what was the response that you got from the Europeans? Are you confident they're going to be able to come up with something cohesive in such a short period of time?

TREASURER:

I think that they understand the importance of a comprehensive range of reforms. It's gone on for too long. What we've got to see is action. We've got to see that on October 23.

TWEED:

One of the issues that the Europeans have got to face - but it also looks as if it's more of a global issue too - is the recapitalisation of the banks. We heard that there's going to be the publication of something like 50 banks which are considered to be systemic.

TREASURER:

We've been looking through the G20 at substantial reform of our financial system, putting in place Basel III. That's very important but what also we've been doing through the Financial Stability Board is looking at the larger financial institutions, how they can be more effectively regulated and supervised. That work was considered today and that will go forward to the leaders meeting.

TWEED:

And if there is a publication of 50 banks, would there be any Australian banks in that list?

TREASURER:

Well, that's a matter for the authorities to publish that list. What we're dealing with here is very large international financial institutions. I don't think many of the Australian banks would fit into that category.

TWEED:

You recently said in parliament that the IMF should have sufficient resources to be able to deal with any systemic crisis. Does that mean that you favour increasing the capital of the IMF?

TREASURER:

Well, Australia has been a very big supporter of the reform of the International Monetary Fund, particularly in terms of the representation of the developing world, that's been very important. And what we said today is that it's really important to provide whatever financial resources are required by the IMF to deal with future challenges.

TWEED:

So does that mean we will see some capital increase at the IMF?

TREASURER:

Well, that will be a matter for the leaders meeting in Cannes but the most important thing is what we've said today is that we've got to recognise what a critical role the IMF plays, not only in terms of surveillance, but also in terms of additional financial resources that may be required from time to time.

TWEED:

So you think that the IMF is undercapitalised at the moment?

TREASURER:

Well, I think what everybody understands is that we've got volatility in the global economy. What we need to do is to ensure that the IMF is adequately capitalised. That will be a matter considered by the leaders.

TWEED:

Are you concerned that the issues of Europe are overshadowing other issues that you need to be addressing in the global economy?

TREASURER:

Well, we certainly need to deal with the European issue but what we also need to do is to put in place an action plan so we have sustained and balanced growth for the future. What we need to deal with is the imbalances in the global economy. What we need to do is to ensure that those surplus countries refocus on domestic demand, put in place market-based exchange rates. What we need to do with those deficit countries is that they do need to put in place adequate fiscal consolidation plans. Those long-term reforms - those structural reforms and retirement income systems in labour markets and so on - are what is required if we're going to continue to have sustained and balanced growth into the future and avoid the sorts of events that we've seen in recent years.

TWEED:

Well, I mean some of the deficit countries are in fact trying to make those structural reforms. Do you think China, as the biggest surplus country, is in fact doing enough at the moment?

TREASURER:

Well, they've certainly put in place a range of reforms in their next five year plan and they are trying to refocus their economy and to bolster domestic demand. That's important and it's important that that occurs globally so we can rid ourselves of some of these financial imbalances.

TWEED:

What about the exchange rate? Do you see it that as an adequate or fast enough appreciation of the exchange rate with China?

TREASURER:

Australia has always been a very strong supporter of market-based exchange rates. We floated our currency over 24 or 25 years ago. We'd like to see that as one of the important structural reforms in the global economy to rebalance growth.

TWEED:

How concerned are you that this global crisis risks affecting Australia's economic growth?

TREASURER:

Well, there's no doubt that Australia could not be immune if there's a substantial slowing in global growth and that's what we are now seeing in terms of the impact on confidence and the impact on stock markets, that reverberates around the world and Australia's not immune from that but we are in the strongest position of just about any advanced economy but we will be affected, not just in terms of growth, but also in terms of our budget and budget revenues.

TWEED:

So does that mean if we do see a further slowdown of this crisis, it doesn't find a resolution from the Europeans, if we see further slowing down and an impact on Australia, do you stand ready to provide more fiscal stimulus?

TREASURER:

I'm not going to speculate about the outcome. What I'd like to see is the European leaders on October 23 get in place a comprehensive package which will deal with the concerns of global markets which will go some way to restoring confidence. I would like to see the same happen in the United States. So I remain an optimist but in the Australian economy we're not immune from these events but we're in a very strong position.

TWEED:

Treasurer, thank you very much indeed.

TREASURER:

Thank you.