Treasurer debt restructuring remains a key issue here.
I mean, how much progress can be made when China maintains it does not want to
take a haircut? If the World Bank doesn't, this is one
of the most important things that we need to grapple with here at the G 20 in
India is how do we recognize that when borrowing costs are going through the
roof and some countries are especially vulnerable to high levels of debt, then
we do need to all come to the table and work out where we can help.
Our Indian hosts have been very good in that regard.
And we need to see other countries take a similar approach.
How does it get unstuck? Do you need to tweak perhaps the common
framework? Well, obviously, the common framework is
one of the things that gets discussed at these meetings to make sure that it is
fit for purpose. And I think at times like now, where
debt is such a prominent part of the things that we are concerned about in
this downturn, post Covid, then obviously it's something that needs to
be addressed. And a lot of the contributions made
around the conference table do go to the sustainability or otherwise of debt,
particularly in vulnerable countries like Sri Lanka.
And so we are all collectively urging all of the partners, all of the
creditors to do whatever they can to make a difficult situation a little bit
easier. There is a lot of doubt that that could
be a communique from the G 20 meeting. Are you optimistic?
Well, it remains to be seen. You know, there are the obvious
perennial sticking points. Ukraine and Russia is obviously one of
those. And we stand with friends from right
around the world in condemning the brutal Russian aggression of Ukraine.
So much of what we are grappling with in the global economy is a consequence of
Russia's invasion. The best thing that could happen for the
global economy would be a Ukrainian victory in Europe.
But beyond that, debt is a sticking point and there's no point pretending
otherwise. And as we negotiate the communique and
hopefully release one before the end of today, hopefully we can make some
progress on debt. But regardless, from an Australian point
of view, this kind of engagement is always worth it.
We give ourselves a much better chance of getting on top of our big global
economic challenges if we engage in good faith with each other.
And that's why I'm here. You talked about how MTBE is like the
World Bank need to be fit for purpose. Of course, leadership is key to that.
And of course, the US has suggested Archie Bunker as the nominee for the
World Bank. What do you think?
Well, we'll confer with our Korean partners in the World Bank and also with
my colleagues back home. Obviously, the Americans have a history
of of putting forward people of quality. And obviously, we will engage with
Secretary Yellen and others about this nomination.
Our highest priority when it comes to the World Bank is making sure that it
focuses on two things amongst amidst all of its other important work.
We do want it to have a focus on climate change and the energy transition.
That's a crucial part of its work. And we also want to make sure that it is
very focused and very alive to the challenges in the Pacific amongst our
friends in the Pacific. And we will consider the proposals that
are put forward for the bank's leadership in that light.
And we will engage with with the Americans and others as the process
evolves. Speaking of challenges, inflation
remains pretty sticky. U.S.
inflation has eased, but still at 40 year highs.
How worried are you about that and what are the implications for Australia's own
inflation? Yeah, well, I think inflation will be
higher than we'd like for longer than we'd like.
One of the key contributions I've been making in these discussions, including
in the discussions behind closed doors, is that we cannot be complacent about
this inflation challenge. It's important that we focus on
multilateral institutions and the development banks and all of these sorts
of things. But all of the challenges that we're
dealing with in one way or another are a subset of the inflation challenge.
We can't be complacent about it just because the inflation peak is behind us
rather than ahead of us. It is still the defining challenge in
the global economy. It's still the defining challenge in the
Australian economy at some future point. The challenge will shift from inflation
to growth, but that for the time being, inflation will continue to be the main
thing that I'm concerned about. Why are you still confident that
inflation in Australia has peaked? When you take a look at the terminal
rate for the Fed, for instance, it's gone from below 5 percent to five and a
half. Some suggesting even six to come.
Yeah, yeah, we're obviously monitoring that very closely.
We we have had a familiar combination of challenges in the Australian economy,
energy prices, shipping costs, labour shortages.
And all of this together has created an inflation challenge and that's pushed up
interest rates in our economy. Now, we think our treasury forecasters
think that the peak was in the December quarter.
Like a lot of countries here, we think the peak is behind us, but nothing is
assured. And we need to be vigilant.
There's a job for central banks that they do independently.
Certainly in Australia, they do that independently.
There's a job for governments as well, and we have a three point plan to
address this inflation challenge, it's about relief for people doing it tough.
It's about repairing our broken supply chains.
And it's about restraint in the budget. That's what we did in the October
budget. That's what I'll do in the May budget.
There are some similar challenges that we're still dealing with.
Not entirely identical situation than we faced last year.
We need to strike all of these balances in the global economy and in the
domestic economy. And that's why we're here and while
we're engaged. A Bloomberg survey suggests that the
probability of a recession in Australia is now higher than before.
Are you confident you can avoid a recession?
It's our expectation that we will. Might change that.
Well, obviously, the things that will slow our economy considerably higher
interest rates and a slowing global economy.
And we've already seen some early indications that both of those things
are biting in the Australian economy. We get our December quarter national
accounts and GDP figures on Wednesday of the coming week.
And so we'll learn more about the December quarter when we get that data.
But our expectation is that the Australian economy will slow
considerably like most of the economies represented here at the G 20.
We're expecting to avoid a recession. We're optimistic about the future, but
we're realistic about particularly the impact of higher rates and a slowing
global economy. On our own economy, China's reopening.
I mean, the world is banking on China's reopening to drive growth.
But you've been pretty unsure about the impact it would have on Australia's
economy and growth. Why is that?
Are you just underestimating or. No, I think it just it's in two phases.
I mean, when the Chinese were going through that enormous Covid wave, my
concern was for supply chains, Chinese supply chains and global supply chains,
which are heavily influenced by what's happening in China.
When we get out of the worst of that Covid wave in China, we are relatively
upbeat about the Chinese economic story over the next couple of years.
We think it will recover a bit quicker than people anticipated last year and a
bit stronger than people anticipated last year.
That's obviously something that we we need to see in the Australian economy.
You asked me why I'm still optimistic. I'm optimistic about the future.
We've got a lot of things going for us in the Australian economy.
We've got good prices for our exports. We're seeing the beginnings of some
decent wages growth after a decade of stagnation.
We've got unemployment with a three in front of it.
We're an incredibly attractive investment destination.
All of those things are going for us, but we've got a lot coming at us as well
from around the world. We need to be realistic about that
investment destination. Of course, China wants greater
collaboration when it comes to life. You say, wait a minute.
International investments into critical minerals need to be scrutinized further.
Are you then not looking forward to enhance cooperation with China on
lithium at least? I think the whole world is interested in
our critical minerals and the opportunities, particularly in lithium,
but also hydrogen. We get a lot of interest from right
around the globe when it comes to those opportunities and we're excited about
them in Australia. We want to be a renewable energy
superpower in Australia and so much of our policy agenda is about that cleaner,
cheaper, more reliable, increasingly renewable.
And how about collaboration with China in particular?
How are you assessing that? Well, we want to collaborate with
partners right around the world. And like any country, we have to work
out what the best version of that is for us and how we apply a sense of the
national economic interest to all of these investments.
But we've said multiple times that when it comes to supply chains, we want to
shore up those supply chains, not shut them down.
Now we want to be a reliable supplier to the world.
We've got tremendous advantages in Australia, a very stable, very
profitable place for the world to invest.
Increasingly, that will be about our energy advantages, whether they our
traditional sources of economic strength or some of these new opportunities in
hydrogen. Lithium batteries and the like.
But we're excited about the future in that regard.
And I think the world is, too, when they look at Australia.
So we're just saying is displayed warming relations between Australia and
China. You're looking to diversify your trading
partners. We got this.
Well, I don't see that as a ISE, an especially controversial strategy.
I think everybody's trying to work out. Post Covid.
What is the best version of our supply chains to make them more resilient, to
make them more reliable at the same time as we don't over learn the lessons of
Covid. We don't want to shut down and look
completely inwards. We do want to make our supply chains
more resilient. We do want to add more value in
Australia. We do want to work out the optimal mix
of domestic and foreign investment in some of these areas of immense economic
opportunity. I think all of my colleagues and
counterparts here at the G 20 are engaged in a similar conversation when
it comes to their own advantages. And that's what we're doing in
Australia. I just want to quickly take a look at
the upcoming budget. I mean, given that there are concerns
about inflation. Are you looking to pull back on fiscal
stimulus? I mean, even pandemic stimulus, that's
been pretty inflation. Well, we've what we've tried to do,
really, since we came to office in May last year and this this May budget this
year will be the second budget of the new Albanese government.
And one of the defining features of the first one and we'll be of the second one
is restraint, spending restraint. So we're getting
an upward revision to revenue because our commodity prices are so strong and
unemployment is so low. And what we tried to do is back most of
that so that we're not adding to the inflationary pressures in the economy.
We did that in October. We banked 99 per cent of the revenue
upgrade over two years. We banked into the budget so that we
could get that debt profile down a bit. So we can make the budget more
responsible and so that we weren't adding to inflationary pressures.
Now, on the other side of the inflation peak, we will have a similar objective,
but the balance is a little bit different at some future point, as we've
been saying here, that the challenge will shift from inflation to growth.
And we need to factor that into.