Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Hansard source

The government’s response to the global recession is to embark upon action here at home aimed at reducing the impact of the recession on Australia, as well as actions abroad to work in partnership with other governments to deal with the cause of the problem, which is the problem of the collapse of private credit flows through the global banking system. Our actions at home are well known to members of the House. They include the stabilisation of domestic financial markets; the provision of the government’s guarantee on bank deposits within Australia; the provision of a short-term stimulus by way of payments to pensioners, carers and veterans to support the 1½ million Australians who work in the retail sector; investment in longer term infrastructure through the biggest school modernisation program in the country’s history; and other investments as well. Furthermore, we are doing this in a fiscally responsible manner consistent with actions taken around the world—short-term deficits, short-term borrowing and short-term debt—in order to fund what is necessary to provide stimulus to the economy. Every government around the world is engaged in these actions at present. It is the responsible course of action.

These are the actions in which we are engaged on the home front to provide economic stimulus support to take up the slack, to the greatest extent possible, that is being left by a private economy in retreat because of the collapse of global credit flows—and that, in turn, goes on to impact on Australian jobs. This government is taking every form of domestic action necessary to continue to support jobs in the Australian economy when the private sector has been moving in the reverse direction.

That is one part of what the government is embracing. The other part is our actions abroad. Over the weekend the Treasurer, representing Australia, and the Governor of the Reserve Bank, representing the Reserve Bank of Australia, attended the G20 finance ministers meeting and central bank governors meeting in the United Kingdom. This is a necessary stepping stone towards the G20 heads of government meeting in London in a couple of weeks time. This is necessary in terms of international cooperation and coordination because of the starkest warnings recently by both the International Monetary Fund and the World Bank about the prospect of the global economy, for the first time, in 2009, actually contracting. This underlines the absolute importance of coordinated global action.

The finance ministers agreed, in their statement coming out of the meeting in London, upon a request to the IMF to monitor the implementation of existing fiscal policies and report on the need for further stimulus. What we do in Australia to provide stimulus is one thing, but what the rest of the G20 economies do is critical in terms of the overall health of the global economy and, underpinning that, the restoration to normality, over time, of global trade flows. Furthermore, finance ministers have agreed on a common framework of principles to deal with toxic assets that are poisoning some of the world’s major banks. This framework on toxic assets contains a common set of principles which underpin a common global approach on the valuation and restructuring of financial institutions. This is necessary if we are to deal with the poison which currently exists within the global financial system—namely, toxic assets sitting on the balance sheets of our globally significant banks. That is where the problem lies in terms of the restoration of normal credit flows to the global economy.

Also, finance ministers have discussed the need for important and decisive action on the future resources and governance arrangements for the International Monetary Fund. Toxic assets within global banks are one thing, but what flows through to the emerging economies, their financial institutions and their international capital flows is something else—and it represents a further future threat to the global economy. Therefore, finance ministers over the weekend also recognised the need to reform the governance of the IMF to give emerging economies a greater say in how these organisations are run and to give further consideration as to the long-term resources of the IMF. I have already mentioned in this House and elsewhere the emerging problems in various economies in the world. We are particularly concerned about the prognosis in Central Europe and Eastern Europe. Beyond that, the finance ministers have focused on the future rules for the governance of the international financial system. Ministers agreed to ensure that systemically important financial institutions, including hedge funds and including institutions which operate in more than a single jurisdiction are appropriately regulated—as well as strengthening their analysis of systemic risk. These are important building blocks going forward in terms of what must be an integrated global response to a global recession.

Furthermore, I report to the House that over the weekend Australia was also invited to join the 11 countries on the Basel committee—that is, the global body that sets standards for global banking. I would make note in this House of the fact that that represents an acknowledgement of the contribution that Australia is making to the reform of the global financial system and is a direct and personal tribute to the standing of, among others, the Governor of the Reserve Bank and the way in which he is regarded by his counterparts around the world.

There are still some weeks to go before the summit of heads of government in London for the G20, and much work is still to be done. What occurred over the weekend at the finance ministers meeting and the meeting of the central bank governors represents useful building blocks towards a positive outcome in London. But that outcome, at this stage, is by no means guaranteed. It is absolutely essential, if we are to see economic recovery in this country and across the world, that we have a restoration to health of the world’s leading financial institutions. Much, therefore, will hang upon the deliberations which occur between now and the events in London.

I thank the Treasurer, in his absence, for his contribution to the important meeting which occurred in London over the weekend, but I again emphasise to the House that, along the way in seeking to restore the global financial system to order, we have many, many bridges yet to cross. Many governments have different views on the way in which we need to get to the outcome which is necessary, but I assure the House that this government is actively engaged at every level with every government around the world to seek to bring about a necessary consensus across the G20 in order to underpin the long-term stability of the global financial system. That is fundamental to the restoration of long-term economic normality in this country as well. That is why the government is as active internationally on these questions as we have sought to be in the decisive action we have taken domestically.

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