Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Hansard source

I thank the member for his question. This weekend, I met with international colleagues at the IMF and at the World Bank annual meetings. I also attended an emergency meeting of G20 finance ministers and central bank governors, which was also attended by the United States President, George Bush. Discussions at these meetings underscored, I believe, that the global financial crisis has entered a new and dangerous phase that has fundamentally changed the circumstances the globe is in and, therefore, the circumstances Australia is in. It is pretty clear that the financial crisis is spreading from the United States, throughout Europe and now, in some ways more remarkably and unexpectedly, into emerging economies in our region.

The IMF’s World economic outlook released this week said that there would be little or no growth in 2009 for the world’s major developed economies: the US, Europe and Japan. It concluded that we will see slower growth in emerging economies as well. That is really before you get to the quite remarkable events that have occurred in the last four or five days. The view of leaders at all of those meetings was that we are in the midst of a major crisis in the modern market economy—one that requires co-ordinated action, one that requires discipline and one that requires leaders around the world to unite in a way in which they have never united before. It is pretty fair to say that, when we had the Asian financial crisis, which prompted the formation of the G20, the sort of international action that was required after that did not occur to the extent that it should have occurred. Of course, what we now find is that there does need to be major, long-term reform of the world’s financial system, and Australia believes that G20 finance ministers are well placed to lead that reform.

The other thing that came out of the meetings was the very strong view that, given the nature of events of recent times, most importantly governments move as quickly and as effectively as they possibly can. The need for action was seen to be urgent, and the sooner governments move to protect their people the better. I am pleased to say that in the time between when I left the United States and today there has already been further coordinated action around the world. That is badly needed and it reflects the goodwill that came out of those meetings and that is required if we are going to stabilise the global economy.

Of course, the government has made the point on many occasions that, if you are going to be in any country in these circumstances, the country you would want to be in is Australia. But we are not immune, and we do have to take action. We welcomed the decisive action of the Reserve Bank when it comes to monetary policy only a week ago. But all nations in the room were also of the view that there needs to be substantial action in many countries, depending on circumstances, on fiscal policy. Because in the May budget we built a strong surplus, and we built it because we knew that there was the possibility of further global instability, we are in a position to ease fiscal policy. It is a surplus, of course, those opposite argued we did not need. They argued that we did not need it in the lead-up to the May budget and now they are still attacking it in the Senate.

We are determined to do everything that is responsible in these circumstances, given the nature of the global shock that we are about to experience, to strengthen our economy. That is the thinking and the analysis behind the package that the Prime Minister launched today. It is also the thinking behind the announcements the Prime Minister has made in relation to our deposit-taking institutions and it has been the thinking behind so many of the actions that this government has been taking to strengthen our financial system since we first met with the Council of Financial Regulators in February this year.

Everybody will recall that this was a very significant issue throughout January, February and March. Fortunately, it stabilised for a time following the rescue of Bear Stearns. Of course, over the last three weeks it has taken that dangerous new path that is so threatening to global growth and therefore to our economy, to businesses and to households. That is why we have announced the package that we announced today, this $10.4 billion strategy. We expect the strategy and this package will leave us comfortably in surplus—and that is a good thing. Surpluses are there for tough times, and tough times have arrived.

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