Today I will begin key meetings in Washington with my fellow G20 Finance Ministers to assess global economic conditions ahead of next month’s Budget, and progress measures to inject confidence into the global economy.
The IMF has highlighted in its April World Economic Outlook that following major turbulence in 2011, global economic prospects are improving but remain uncertain.
Key advanced economies are still weak and there remains a clear threat posed by the European sovereign debt crisis. Important reforms are still needed to minimise the risk of contagion from instability in Europe.
However the Outlook also confirms that economic prospects in Asia remain healthy, as the weight of global economic activity continues to shift to our own region.
The Outlook confirms Australia’s own economic fundamentals are strong with the Australian economy expected to outperform every major advanced economy over the next two years.
Despite ongoing volatility abroad, Australia walks tall with an economy returning to trend growth, low unemployment, contained inflation, very low public debt and a huge investment pipeline.
Given our strong economic fundamentals, I will be reporting to my G20 colleagues that the Australian Budget will return to surplus in 2012-13. This will help give the Reserve Bank the flexibility to cut rates further if it considers that necessary, and will send a clear message about Australia’s economic strength at a time of global uncertainty.
Returning to surplus is also our best defence at a time when countries which have failed to stick with sound fiscal discipline continue to face huge economic and social problems.
This difficult global environment continues to impact on our budget, with $140 billion ripped from government revenues by the worst bout of global economic turmoil since the Great Depression, making the return to surplus more difficult.
While it is important to ensure our domestic policy settings are appropriate, we must also do everything we can to avoid a repeat of devastation caused by the global financial crisis. There is a difficult road ahead for many advanced economies and we shouldn’t be surprised to see bouts of instability continue for some time to come.
That’s why I will first and foremost be making clear to European Finance Ministers the need to continue putting in place the reforms needed to lift economic growth and get their budgets in order.
We must continue the approach of successive Australian Governments of ensuring the IMF has sufficient resources to address any potential contagion in the global economy, including in our own region.
That is why my fellow Finance Ministers and I will seek to build on the commitment of G20 Leaders in Cannes last year to ensure the IMF has the resources necessary to help insulate the global economy from the ongoing problems in Europe.
Over many years, Australian Governments of both political persuasions have worked with the IMF to support global economic stability, and I will continue that work with my fellow Finance Ministers this week at my 20th G20 meeting.
I will meet bilaterally with a number of my G20 colleagues as well as the Managing Director of the IMF, Christine Lagarde, the outgoing President of the World Bank, Robert Zoellick, and the Chairman of the Federal Reserve, Ben Bernanke.