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

5 November 2012

Doorstop Interview

Mexico

SUBJECTS: G20 Finance Ministers' Meeting

TREASURER:

I'd like to start by thanking our Mexican host, not just for their hospitality, but also for their commitment to the G20 and for their commitment to a whole host of policies which will make our global economy a better place.

As we leave here, we leave at a time of great uncertainty in the global economy - the European recession and of course the weak growth in the United States is beginning to weigh heavily on global economic growth.

Of course, at home it has had a very big impact on our own budget, and in my mid-year budget update a couple of weeks ago we wrote down revenues to the tune of $22 billion across the forward estimates.

I think most here have welcomed the recent actions of central banks both in Europe and also in the United States as one way to strengthen growth in the global economy. But of course, more needs to be done.

I think there was a clear message from many in the room today to our European colleagues that they do need to remove the policy uncertainties that are dragging on growth and investment. I think people welcomed the OMT being put in place as quickly as possible, but also stress the need for further policies to strengthen growth and further policies to strengthen structural reform within Europe.

There was also discussion about the fiscal cliff and a view that swift action following the Presidential Election will certainly be welcomed as another way of removing uncertainty which is weighing on the global economy.

The facts are these: that global growth with a '3' in front of it simply doesn't cut the mustard. We do need a host of reforms which will lift global growth over time, so that in particular developed economies can reduce unemployment and deal with the challenges that they face in their domestic economies.

It is a very strong view that whether you are a developed economy or a developing economy that we need structural policies in place which not only promote growth in the short-term, but lift economic capacity and productivity in the long-term.

We also had a discussion about the role of international financial institutions and the importance of the IMF. Certainly all members welcome the additional resources which have been made available to the IMF of $460 billion which were announced some months ago. Today we reaffirmed the importance of the IMF by having further discussions about the need for further reforms in both governance and voice within the IMF.

We also commissioned further work on investment and infrastructure as one way in which we can promote growth in developed and developing economies as well as to lift the productive capacity of those economies over time and I look forward to seeing that work.

We also heard reports today on the progress and the implementation of our new financial regulation agenda, particularly Basel III, and it is satisfying to hear what progress has been made in that area.

When I leave here today I'm going on to Washington to have meetings with the Chairman of the Federal Reserve, Christine Lagarde the head of the IMF, and of course Tim Geithner the US Treasury Secretary. It will be a very good opportunity to get a further briefing on the views of prominent policy makers in Washington as to what must be done following the Presidential Election to deal with the fiscal cliff.

In terms of Australia, we are not immune from these events in the global economy but our economic fundamentals remain strong. Australia has around trend growth, solid consumption, a huge investment pipeline in resources, contained inflation and lower interest rates. They are the strongest of the fundamentals of just about any developed economy within the global economy.

The Australian economy is now 11 per cent larger than it was prior to the Global Financial Crisis. The Chinese economy indeed is 40 per cent larger than it was prior to the Global Financial Crisis. So in terms of the Australian economy, we are in the right part of the world at precisely the right time. Over the past few years, emerging countries, but particularly in the Asia-Pacific, have been supplying over 50 per cent of global growth and as the economic weight in the global economy continues to shift from West to East that will remain the case.

But nevertheless, a strongly growing global economy also requires stronger growth in Europe on the one hand and in the United States on the other, so that we can lift global growth over time to levels well above where they are now, so that globally we can achieve a significant improvement in terms of lowering unemployment across both developed and developing economies.

Australia is now the 12th largest economy in the world and what we do in our region is make sure that we are a reliable supplier of energy to the region. In recent times we produced an Asian Century White Paper because Australia is determined to further deepen its links in the Asian region and to ensure our engagement and trade with that region broadens out from just resources and agriculture to supply a whole host of services for the emerging middle classes in Asia, which in the future will consume much more of the services not just of Australia, but of the world. By the end of this decade Asia will not only be the largest production zone in the world, it will be the largest consumption zone. Global growth in the future will be more impacted upon by what happens in Asia than elsewhere. But what recent events have shown is that we're all in this together and to achieve strong global growth even in Asia we do need large, important economies such as Europe on the one-hand and the US on the other growing well. Through the framework that we endorsed here today, the framework for strong and balanced growth, it is our hope that we see fundamental structural reforms put in place across all economies which further that objective of strengthening growth for all people in the global economy. Over to you.

JOURNALIST:

(inaudible)

TREASURER:

I wouldn't characterise it that way. If you look at paragraph six 'we will ensure our public finances are on sustainable paths, and in line with the medium term Toronto commitment'. Deficits are covered in the in the medium-term Toronto commitment. That's what Toronto is about - I was in Toronto when those objectives were outlined.

JOURNALIST:

(inaudible)

TREASURER:

Yes that's true, and I think we've got plenty of time to that and this is the subject of discussion, and indeed I think it was the subject of some discussion through these meetings, but that will lead into next year and the Russian Presidency.