Thank you Paul [Donnelly, President and CEO, Macquarie Capital Markets] for that warm introduction.
And I thank the hosts of today's function, Canada 2020 and the Canadian Australian Chamber of Commerce, for your generous hospitality on this – my first official visit to Canada. I am honoured to be here today.
It's appropriate that right up front, I acknowledge the central role that Kevin Rudd played as Australia's Prime Minister in helping to make the G20 the premier global economic forum. I know how committed Kevin was to this. I know how hard he worked on this. It's given Australia a strong voice in the global economic debate and a seat at the table in shaping our economic future.
The Australian Government under Prime Minister Gillard remains just as determined to see the G20 continue as the premier global economic forum. And for Australia to continue to play a meaningful role in fashioning the world's response to matters that touch all our peoples, all over the world – their jobs, their prosperity and their security.
Australia and Canada's Shared Interests
Australians and Canadians have tended to view our relationship through the prism of shared history and shared values.
That said, we do have our different perspectives. I could launch into a comparison of cricket and hockey, but you'll be pleased to hear I'm going to resist that. Because I know that on Canadian soil, I will lose the argument as to whether Wayne Gretzky or Donald Bradman was the greatest sportsman of all time.
But seriously, we should never undersell the substance and significance of the Australia-Canada relationship. The truth is – as prosperous, resource-rich, multicultural liberal democracies, Australia and Canada have a similar story to tell the world. And it's a great story.
We both draw on colonial roots and have a proud heritage of Indigenous cultures. Our paths to nationhood were also not easy. We both went to war in 1914 convinced we were British, but by 1918 it was clear that we were Australian and Canadian.
We played important roles in the birth of the Bretton Woods system, and through the G20 we are reinvigorating the Bretton Woods institutions. We remain committed to the United Nations and its ideals, and, here in Toronto, are proud supporters of the G20.
As two multicultural, highly-educated and affluent countries, we possess a policy creativity and a capacity to build diverse coalitions that can deliver real change. This is what brings us to Toronto this week.
Our meeting here is the fourth G20 Leaders' meeting since November 2008 – and we will meet again this year in Seoul. For me personally, it's a privilege to attend my fourth G20 Leaders' meeting, this time in my capacity as Deputy Prime Minister.
I believe that Washington, London, Pittsburgh, Toronto and Seoul will be seen as among the most significant global gatherings of our age. These gatherings recognised that our collective contributions would be far more than the sum of our individual parts in an inter-dependent world economy.
And act we have. We acted to prevent the global economy going over a cliff. To stabilise the global economy and put it back on the road to recovery. And to make sure the damage suffered by economies, by businesses, by communities and families does not happen again.
The Global Financial Crisis
When historians write about the first decade of this century, two events will stand out. The first will, of course, be the tragic events of September 11. The second will be the tumultuous events in the global economy over the past two years – and how the recovery played out.
In a stunning display of how inter-connected the world has become, we witnessed financial shockwaves roll across continents to become a global economic tidal wave that threatened to rival the Great Depression. It is worth reminding ourselves just how significant an event it was.
Global output fell for the first time since the 1930s. None of the events of the past seven decades had ever caused global GDP to fall. Not World War Two. Not the 1970s oil crisis. Not Black Monday in 1987. Not the Asian Financial Crisis. But in 2009, the collective output of the world's economies went backwards.
We faced the sharpest, deepest, most synchronised global economic recession in 75 years. On some accounts, by the end of 2010 the loss in global output arising from the shock to global growth could be around US$4 trillion. The number of jobless people worldwide rose by more than 30 million in the past two years. And the destruction of wealth was unprecedented in peace time.
But among all this, one fact stands out. We avoided a Global Depression. The events of 2008 could easily have spiralled into a crisis to rival 1929. But thanks to coordinated, decisive and rapid global action led by the G20 economies, that did not happen.
G20 member nations came together to implement what was probably the largest, most comprehensive and most coordinated stimulus strategy ever seen. This is what brought the world back from the brink.
But of course challenges still remain. Some countries – particularly in Europe – face mountainous public debt. And unemployment levels in countries like the United States remain far too high. But none of that compares to the devastation that would have occurred without serious global action.
Relative to other industrialised economies, Australia and Canada faced the global crisis from a position of considerable strength. We both implemented timely and targeted fiscal stimulus packages at the height of the crisis to restore confidence, support investment and minimise job losses.
The Australian and Canadian economies are now recovering solidly. And our financial systems remain sound, underpinned by strong regulation and, importantly, effective supervision. Our Governments were not called on to bail out major financial institutions – in stark contrast to the experience of the US and Europe. And our public finances remain among the strongest in the world.
The Australian and Canadian Federal Governments have both laid out clear fiscal strategies to accelerate the return to budget surpluses. Here Australia and Canada are ahead of the pack. Australia's budget will be back in surplus in 2013 – that's three years from now, three years earlier than expected just 12 months ago. And Canada will be the first of the G7 economies to get back in balance, in 2015.
And it's important that G20 countries move to follow our lead and put in place credible medium-term fiscal consolidation plans.
Our Task at Toronto
Having seen off the worst, the task we now face – Australia, Canada and our G20 colleagues – is to sustain and strengthen global growth. This minimises the risks of future crises occurring again.
With a return to global growth of around 4 per cent expected this year, there is no room for complacency. We need to learn the lessons from the past and maintain a unity of purpose. That is why Australia and Canada must continue their effectiveness and activism in the G20.
Our effectiveness as creative middle powers has helped engender the cooperative spirit that has supported the G20's decisive response to the crisis. That creative and cooperative spirit will be vital here in Toronto.
I see three key areas where this spirit can be put to good use by the G20.
First, we need to focus on financial resilience. A big task at Toronto and beyond is to strengthen the global financial system; we need to accelerate financial sector repair and reform.
Australia and Canada have much to contribute to the G20 debate by drawing on our strong financial systems and world-class supervision. We are both committed to stronger global standards in financial markets to rebuild confidence in global financial markets. But we have to make sure we get the new standards right. Like Canada, Australia's financial system did not experience the kinds of turmoil seen elsewhere, so it is not expected to need the same kinds of adjustments.
Part of getting the new standards right means ensuring they take into account legitimate country circumstances. There are particular features of markets and institutions that legitimately differ by country, and this means that global standards need to be flexible enough to cover these differences.
An enormous amount of work has already been done on this front. We've been working through the Basel Committee to ensure these new standards are appropriately calibrated to support the continued flow of credit.
But new standards alone are not enough. They need to be enforced. And that demands effective supervision. We have always believed that standards and supervision are two sides of the same coin of strong, sound financial systems.
In Australia, we've got tough regulators who've been consistently tough with our banks. We fondly – mainly – refer to them as watchdogs; they bark, and sometimes bite – with teeth.
Both our nations also support the general principle that the financial sector should contribute a fair share of the cost of bailouts. That's why I moved in June 2008, before the collapse of Lehman Brothers, to put in place a Financial Claims Scheme. This provides a framework to recover taxpayers' money in the event of a bank failure – although we have never had to use this power.
But it's also really important to remember that the crisis didn't play out the same way in every country. In Australia, we did bring in a wholesale funding guarantee so that our banks could keep competing in global capital markets on a level playing field. But our banks were resilient enough to be able to pay a fee at the time for access to the guarantee, so our taxpayers didn't foot any bill.
While we need to continue our cooperation at the G20, it will always be the case that countries will need to tailor global agreements to suit domestic circumstances. One size does not fit all. This is a view I know we share with Prime Minister Harper and Finance Minister Flaherty.
The second area that's a key focus in the G20 is fiscal sustainability.
Concerns over fiscal sustainability in some European countries, and the associated volatility in global financial markets, is an enduring reminder that risks remain in the global economy. This underscores the need for advanced deficit economies across the world to establish credible fiscal plans.
But the speed and timing of this consolidation must be tailored to national circumstances, so we do not derail the recovery already underway. In Australia, we're consolidating public finances, while still ensuring appropriate support for weaker sectors of the economy.
This leads me to the third area where the G20 has a critical role to play – growth sustainability. Central to this is achieving balanced growth.
That is why China's recent announcement to increase the flexibility of its currency is a welcome development. It is a constructive contribution that recognises China's economic integration with the global economy and the fact that its increasing economic size and associated policy settings impact on others.
It's a move that is in China's best economic interest and it will help produce a more balanced global economy. But while China's enhanced exchange rate flexibility is important, it is only one element of a broader suite of structural economic reform policies that will assist in rebalancing growth.
Of course sustainable growth is not just about rebalancing global growth. It is also about lifting future growth potential. Put differently, we must lift global growth. Not simply shift it.
This means all countries need to pursue hard structural economic reforms at home. And it is always the reforms that are most worthwhile that are the hardest to achieve.
Part of Australia's economic success during the global crisis was built on a 25-year program of comprehensive structural reform. This has helped Australia stay ahead of the game, but we are not resting on our laurels.
We're moving on to the next phase of economic reforms to strengthen and secure our economy. Reforms like ensuring our health and pension systems are well equipped to deal with ageing populations. Like expanding productive capacity in education and infrastructure, and through our high-speed national broadband network. And importantly, reforming the tax system to strengthen and broaden our economy.
We are overhauling the old royalties system of taxing resources which discouraged investment – replacing it with a profits-based system that will encourage investment. And we are directing the proceeds to fundamental reforms that will strengthen the economy. Reforms like cutting the corporate tax rate so businesses can compete strongly, superannuation reforms that lift national savings, and infrastructure investment to build export capacity.
It is not just Australia that faces a challenging reform agenda. All countries will confront reform challenges in areas particular to their economic circumstances. But there is at least one challenge we face collectively. That is avoiding the temptation of trade protectionism, especially in tough times.
The G20 has played a major role in ensuring we have not slid into a protectionist race to the bottom. Trade is central to our efforts to promote a sustainable recovery in the medium term. Concluding Doha would provide a strong confidence boost for the global economy – and on some estimates, between $150 to $500 billion in GDP gains annually.
To bring this all together, it is these three areas that I have mentioned – financial sustainability, fiscal sustainability and growth sustainability – which will allow the G20 to restore a global economic order that is strong, balanced and sustainable. A global economic order from which we can all benefit and prosper.
Asia and the G20
It is this global economic order that will also see a profound shift in the weight of economic activity to the Asian region.
The region already represents more than half of global production and close to half of world trade. China has become the world's second largest economy. Japan remains a regional economic powerhouse, and Korea is going from strength to strength. India has been one of the world's fastest growing large economies since 1994, and Indonesia is a significant emerging market.
Asia is becoming the engine room of global growth. According to the IMF, Asia's economy will grow by 50 per cent over the next five years. And by 2030, Asia could well be the world's biggest economic region, exceeding that of the G7.
Australia and Canada are uniquely placed to benefit from Asia's expansion given our proximity and our abundance of mineral resources. Asia's strong growth is already driving commodity prices back to boom time levels and Australia's terms of trade towards a new 60-year high. These opportunities are why we are determined to put in place an efficient system of taxing resources that will strengthen our economy and provide an enduring legacy for our people.
The dynamism of the Asia-Pacific means that our region is becoming not only the centre of global economic weight, but also of strategic weight. It is where the critical template of relations between the world's only superpower – the United States – and the world's rising power – China – will be forged. It is where the other great powers – India, Japan and Russia – will jostle in an increasingly dynamic strategic landscape.
Managing this strategic dynamic to foster habits of cooperation and minimise the risk of conflict is as great a challenge as our global economic enterprise in the G20. Again, this requires action.
We need to work together to shape the future we would like to see, and avoid one that we may regret. For Australia, like Canada, this means strong bilateral relationships with the key countries in the region.
I don't need to tell Canadians how important the United States is. It will continue to underpin regional stability and security for the foreseeable future, and our Government is committed to further strengthening our most critical alliance.
At the same time, we are strengthening our relations with Japan, Korea and India.
Our relationship with China has transformed in recent years. It is now our largest trading partner and we continue to build a multi-layered relationship – including security cooperation. Just earlier this week China's Vice President was in Australia signing mining investment contracts worth many billions.
But bilateral relationships need to be complemented by effective multilateral forums for cooperation. This is particularly the case in the Asia-Pacific where its growth and dynamism will inevitably see some tensions and rub. That's why Australia so strongly supports effective regional architecture such as APEC – where we work side by side with Canada – and the East Asia Summit.
Which brings me back to the G20. The biggest Asia-Pacific players are all present and accounted for. The G20 seriously expands Asia's stake in global economic governance: from Japan's solitary role in the G8 to a situation where Japan, China, Korea, India, Indonesia and Australia are all at the G20 table.
At the dawn of the Asian century, we have an institution that is configured to reflect the new realities. This will ensure that the most dynamic region in the world is actively engaged in shaping the world for the benefit of our peoples and generations to come.
On the evidence to date, the G20 is fulfilling this promise. And I am confident that our meetings tomorrow will continue in this vein. And that through the G20 we can get it right. We can usher in a new age of global stability and growth.
For the G20 as a whole, the opportunity to manage a new age of global growth and stability is ours – but so is the responsibility. We will not waste this opportunity.
Thank you.