Australian Treasurer Joe Hockey said there was “no way” Group of 20 nations would soften their commitment to increasing gross domestic product by an additional 2 percent.
“You’ve got to be ambitious,” Hockey said at the Bloomberg Summit in Sydney today. Since the target was set in February, “there’s been a very large number of policy initiatives delivered to us by countries. We are not too far away from the 2 percent.”
Rising geopolitical risks including the crises in Ukraine and Iraq have threatened to overshadow Hockey’s goal of increasing GDP by an additional 2 percent across the world’s largest economies over five years.
Australia’s own growth slowed last quarter as the currency strengthened and commodity prices weakened. Hockey, who hosts G-20 finance ministers and central bank governors at a meeting in Cairns this weekend, said complacency was the biggest threat to the growth target.His agenda is aimed at boosting expansion by more than $2 trillion over five years.
“Fiscal policy isn’t going to deliver, monetary policy is not going to deliver what we need over the medium term,” Hockey said. “It’s only through reform, and it has to be hard reform.”
Waning Boom
Australia, which has seen its economy expand for 23 years, is losing its developed-world-beating status as the mining investment boom that powered it through the global financial crisis wanes.
Discouraging local investment is an Australian dollar that has averaged about 91 U.S. cents in the past eight years, including a record-high $1.10 in July 2011, prompting a wave of manufacturing closures including the planned shuttering of the nation’s car industry.
In the 15 years that followed Australia’s last recession in 1991, the currency averaged about 68 cents. “We’ve just got to manage” with the currency’s level, Hockey said, adding trying to forecast movements in the so-called Aussie was a “mug’s game.”
“There were warnings of deep Armageddon if the Aussie dollar remained comparatively extraordinarily high for a long period of time but we cope,” he said. “We cope because we’re a pretty flexible economy and we’re an innovative nation.”
China Slowdown
A slowdown in China, Australia’s biggest trading partner, is also weighing on the South Pacific nation’s outlook. Reports on Chinese factory production, retail sales and asset investment over the weekend all missed estimates, underscoring the risks of a deepening economic slowdown led by a slumping property market.
Royal Bank of Scotland Group Plc cut its forecast for China’s 2014 economic growth to 7.2 percent from 7.6 percent, citing weak momentum indicated by the August data.
Hockey said he remains “bullish” on China because it has an enormous capacity to grow, and must do so to create 14 million jobs every year.
“China is still going through tremendous reform but I think the determination of Beijing to continue that reform and the fact that China has one of the most ambitious plans to be put before us in relation to the G-20 for policy reform is very encouraging,” Hockey said.
“There are parts of the Chinese bureaucracy that will resist change but I think there is a steely determination at most senior levels to deliver that change.”
Funding Risks
Another focus of the G-20 meetings this year will be to strengthen consistency in the treatment of risk weightings applied to bank assets, Hockey said.
The Financial Stability Board will be working to establish a “backstop” to better manage long-term funding risks for banks and is considering new proposals known as Total Loss-Absorbing Capacity to protect consumers should they fail, he said.
Global regulators are split over how far to push the biggest banks to issue unsecured debt and other instruments that could be written down in a crisis.
The guidelines are part of a package of measures designed to make sure taxpayers are no longer on the hook when banks fail. “As a result of previous decisions, banks are now generally better capitalized,” Hockey said.
“New capital and liquidity requirements will make banks more resilient to short-term disruptions.”
While the G-20 will also be working to ensure so-called shadow banks don’t become a new source of systemic risk, it mustn’t over-regulate normal banking activities, he said.
“There is recognition that more onerous regulation can drive more lending activity towards unregulated entities, so we must be mindful that excessive regulation is the enemy of free capital flows,” he said.
bloomberg.com
“You’ve got to be ambitious,” Hockey said at the Bloomberg Summit in Sydney today. Since the target was set in February, “there’s been a very large number of policy initiatives delivered to us by countries. We are not too far away from the 2 percent.”
Rising geopolitical risks including the crises in Ukraine and Iraq have threatened to overshadow Hockey’s goal of increasing GDP by an additional 2 percent across the world’s largest economies over five years.
Australia’s own growth slowed last quarter as the currency strengthened and commodity prices weakened. Hockey, who hosts G-20 finance ministers and central bank governors at a meeting in Cairns this weekend, said complacency was the biggest threat to the growth target.His agenda is aimed at boosting expansion by more than $2 trillion over five years.
“Fiscal policy isn’t going to deliver, monetary policy is not going to deliver what we need over the medium term,” Hockey said. “It’s only through reform, and it has to be hard reform.”
Waning Boom
Australia, which has seen its economy expand for 23 years, is losing its developed-world-beating status as the mining investment boom that powered it through the global financial crisis wanes.
Discouraging local investment is an Australian dollar that has averaged about 91 U.S. cents in the past eight years, including a record-high $1.10 in July 2011, prompting a wave of manufacturing closures including the planned shuttering of the nation’s car industry.
In the 15 years that followed Australia’s last recession in 1991, the currency averaged about 68 cents. “We’ve just got to manage” with the currency’s level, Hockey said, adding trying to forecast movements in the so-called Aussie was a “mug’s game.”
“There were warnings of deep Armageddon if the Aussie dollar remained comparatively extraordinarily high for a long period of time but we cope,” he said. “We cope because we’re a pretty flexible economy and we’re an innovative nation.”
China Slowdown
A slowdown in China, Australia’s biggest trading partner, is also weighing on the South Pacific nation’s outlook. Reports on Chinese factory production, retail sales and asset investment over the weekend all missed estimates, underscoring the risks of a deepening economic slowdown led by a slumping property market.
Royal Bank of Scotland Group Plc cut its forecast for China’s 2014 economic growth to 7.2 percent from 7.6 percent, citing weak momentum indicated by the August data.
Hockey said he remains “bullish” on China because it has an enormous capacity to grow, and must do so to create 14 million jobs every year.
“China is still going through tremendous reform but I think the determination of Beijing to continue that reform and the fact that China has one of the most ambitious plans to be put before us in relation to the G-20 for policy reform is very encouraging,” Hockey said.
“There are parts of the Chinese bureaucracy that will resist change but I think there is a steely determination at most senior levels to deliver that change.”
Funding Risks
Another focus of the G-20 meetings this year will be to strengthen consistency in the treatment of risk weightings applied to bank assets, Hockey said.
The Financial Stability Board will be working to establish a “backstop” to better manage long-term funding risks for banks and is considering new proposals known as Total Loss-Absorbing Capacity to protect consumers should they fail, he said.
Global regulators are split over how far to push the biggest banks to issue unsecured debt and other instruments that could be written down in a crisis.
The guidelines are part of a package of measures designed to make sure taxpayers are no longer on the hook when banks fail. “As a result of previous decisions, banks are now generally better capitalized,” Hockey said.
“New capital and liquidity requirements will make banks more resilient to short-term disruptions.”
While the G-20 will also be working to ensure so-called shadow banks don’t become a new source of systemic risk, it mustn’t over-regulate normal banking activities, he said.
“There is recognition that more onerous regulation can drive more lending activity towards unregulated entities, so we must be mindful that excessive regulation is the enemy of free capital flows,” he said.
bloomberg.com
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