The Treasurer, Mr Peter Costello, attended the meeting of the Group of Eight industrial nations’ (G-8) Finance Ministers in St Petersburg, Russian Federation on 10 June. This is the first time an Australian Treasurer has been invited to a G8 Ministerial.
The Treasurer was asked to lead the opening session on “Good Governance in Public Finance”, with reference to Australia’s achievements over the last ten years. The Treasurer outlined the importance of fiscal discipline in ensuring macroeconomic stability, sustained growth, rising employment and low interest rates and inflation.
Treasurer Costello identified five key components to the fiscal framework that has delivered 9 surpluses in the last 11 budgets, eliminated Commonwealth net debt and put Australia in the forefront of world’s best practice fiscal management.
- A clearly articulated medium term fiscal strategy.
- The preparation of fiscal reports against clearly understood external reporting standards.
- Timely reporting on fiscal developments and outcomes, including through an independent pre-election economic and fiscal outlook.
- A clear articulation of the assumptions underpinning the economic and fiscal position so these are subject to external scrutiny, combined with sensitivity analysis of the risks to the outlook.
- A focus on intergenerational equity that both provides a benchmark against which progress can be assessed and heightens public attention on longer-term issues of fiscal sustainability.
These five components are reflected in Australia’s Charter of Budget Honesty; the Government’s annual statement of fiscal strategy, which highlights the focus on maintaining budget balance on average over the cycle; budget reporting using both the IMF’s Government Finance Statistics (GFS) standard and Generally Accepted Accounting Principles (GAAP); the five-yearly Intergenerational Report; and the creation of the Future Fund.
The Treasurer also emphasised that legislative frameworks will be ineffective without good institutional and political governance, which remains the responsibility of the leaders and citizens of individual countries.
The G8 meeting also discussed the role of emerging donors in achieving good development outcomes, and the importance of a speedy and substantive outcome to the Doha trade round. The meeting also considered global economic developments and energy issues – energy and resource commodities are a key theme of the meeting of G-20 Finance Ministers and Central Bank Governors to be held in Melbourne in November 2006.
The G-20 (the Group of 20 nations systemically important to the international financial system, which brings together industrialised nations and emerging economies) has become a lead forum to discuss governance reform at the IMF and World Bank. Australia has taken a lead in facilitating an agreement on these issues and this will be a key theme of meetings with IMF Managing Director Rodrigo de Rato in Canberra this week.