Australian Treasurer Wayne Swan said most of his G20 counterparts see the global recovery as “fragile” and urged Europe to press on with closer financial integration and the US to cut its budget deficit.
“It’s critical that leaders of many major economies now get on with the necessary structural reforms needed to underpin growth,” Swan said in his weekly economic statement released yesterday.
“From my initial meetings, it’s clear most of my G20 colleagues view the global recovery as fragile,” he said.
The world economy will grow 3.3 percent this year, the slowest since the 2009 recession, and 3.6 percent next year, the IMF said on Oct. 9. That compares with July predictions of 3.5 percent for this year and 3.9 percent for next year.
Even as the US has recorded more positive data in recent weeks, the nation’s recovery remains “shaky,” Swan said.
“The most pressing issue for whoever wins this week’s presidential election will be working with Congress to avert the fiscal cliff,” Swan said, referring to US$607 billion in federal spending cuts and tax increases scheduled to take effect in January unless the US Congress acts.
US President Barack Obama and Republican candidate Mitt Romney crisscrossed the US on the final weekend of the campaign before tomorrow’s election as a closely watched poll in the swing state of Iowa showed the incumbent ahead there.
Obama is leading the Republican challenger 47 percent to 42 percent among likely Iowa voters, the Des Moines Register’s Iowa Poll shows.
“While avoiding the fiscal cliff is critical to supporting activity in the months ahead, the US will also need to outline a strategy to get its budget back on a sustainable footing to support economic growth over the longer term,” Swan said.
Swan said he will travel to Washington from the G20 summit in Mexico for meetings with US Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke, US Congressional Budget Office Director Douglas Elmendorf and IMF Managing Director Christine Lagarde.
In Europe, Greek Prime Minister Antonis Samaras’s bid to please lenders from the EU and IMF with a 13.5 billion euro (US$17.3 billion) austerity package and unlock funds ran into renewed obstacles last week. A law on state asset sales scraped through parliament, raising questions whether the government will be able to muster enough support to pass the measures.
Swan said that about 18.5 million people in Europe are looking for work, more than Australia’s entire adult population.
“Perhaps most troubling is the fact that youth unemployment is around 50 percent in countries like Greece and Spain,” he said.
Europe’s unemployment rate is 11.6 percent, compared with 5.4 percent in Australia.
Back in Australia, Swan is bidding for a A$44 billion (US$45 billion) swing to bring the nation’s budget back to a surplus in time for an election due by late next year.
“We have an enviable combination of solid growth, low unemployment, contained inflation and low debt, with the budget returning to surplus ahead of every major advanced economy,” he said. “The problems we see in so many parts of the developed world only highlight the need for Australia to continue our nation’s long record of reform.”