Julie Collins (Franklin, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Treasurer. What were the outcomes of the G20 finance ministers meeting held over the weekend in London and what do they mean for the upcoming leaders meeting?

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

I thank the member for Franklin for her question because we are in the middle of a global recession and that requires global solutions. The meeting at the weekend agreed to take whatever steps are necessary to restore growth. It is pretty fair to say that the meeting at the weekend was one of the most important G20 meetings that has ever been held. It made quite substantial progress in advance of the leaders’ meeting in a couple of weeks time. It is worth focusing on why the finance ministers were so galvanised, if you like, at this meeting over the weekend, because the latest figures that are coming out on global growth are sobering. Indeed, figures presented at the meeting at the weekend show that, on an annualised basis, growth in the developed world went back seven per cent in the December quarter. What this demonstrates is just how difficult the global environment is at the moment and why there is such an urgent need for there to be international action.

Four achievements stand out from the meeting over the weekend. The first one was that all of the 20 largest economies in the world are focused on dealing with the problem of toxic assets in the banking system. This is very important because it goes to the core of the ability of credit to flow globally and that then goes to the core issue of confidence in the international financial system. It is the case that the failure or inability of some governments to clean up these toxic assets, which we did not have in this country, but to clean them up elsewhere, is certainly restricting growth in domestic economies, slowing the world economy and then further eroding confidence in the international economy. It was good to see an agreement to a framework for international cooperation in this area which is based largely on proposals put forward by the Prime Minister. Our government put forward a set of proposals, as did the British government, and they were substantially adopted in the communique.

Secondly, all of the 20 largest economies in the world agreed on the importance of economic stimulus, on the importance of fiscal stimulus—

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Not the Europeans.

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

Yes, they did. Finance ministers from across the political divide understand the importance of boosting demand to avoid a damaging loss of output, much higher unemployment, much higher budget deficits and, of course, what follows from that: much higher debt. The conservative governments in the room put forward economic stimulus packages. Conservative governments in the room on the weekend were very strong advocates of economic stimulus—namely, the Germans, but also the French and many others. That was because all of the leaders in the room last weekend, all of the finance ministers, understand, unlike the Liberal and National parties in this country, that action is required early to boost demand to avoid more damaging outcomes in the long run. So the communique did strongly support economic stimulus, and it was signed up to by governments of all political persuasions from around the world, most of whom are putting in place substantial economic stimulus packages.

Thirdly, the meeting agreed on the need for substantial reform of international financial institutions, most notably the IMF. Australia was the chair of that committee, along with South Africa, and those proposals are going forward to the leaders meeting. Fourthly, the meeting agreed to put forward a set of proposals to regulate and supervise international financial systems. These are very important. So there was a striking consensus across the developed and developing world and, as I said before, across governments of different stripes.

There are only one or two parties around the world who do not think that these initiatives are important and who do not support economic stimulus. Of course, one or two of those parties sit here in the Australian parliament. They are a pretty select band. They are joined by the radical right of the Republican Party in the United States, but there are not many others, because around the world, irrespective of the political divide, governments understand that economic stimulus is critical in an environment where there has been a sudden drop or contraction in demand and that failure to act simply pushes up unemployment and causes a greater drop in output and therefore greater damage to the economy in the long run. All of those leaders said that not to act—to sit and wait and see, as those opposite advocate—is the height of irresponsibility. Their approach was certainly not supported by anyone in that room in the G20 over the weekend.

It was an important meeting, and it sets the ground rules for the meeting in two weeks time. At that meeting, the Australian people can be assured that the Prime Minister and this government will be doing everything we possibly can to support an outcome that boosts global growth, that reforms our financial system and that supports employment. Internationally, the approach of those opposite—to ‘sit and wait and see’—is rejected by every other major political party in the Western world and the developing world.