Australian Treasurer Joe Hockey said the gradual normalization of monetary policies as growth recovers in advanced economies is a “positive development” and a sign of growing confidence in the global outlook.
While the U.S. Federal Reserve needs to be aware of international implications as it withdraws stimulus, it ultimately has to “operate in a manner that is consistent with its domestic mandate,” Hockey said today at an Institute of International Finance conference in Sydney ahead of a meeting of Group-of-20 finance ministers and central bankers.
Policy makers in developing markets including Turkey and South Africa have been forced into emergency steps as investors sold off currencies, stocks and bonds after the Fed’s decision to scale back asset purchases. Hockey said the G-20 should seek to understand how to manage such destabilization and improve macroeconomic coordination.
“The stakes are higher now than perhaps we had anticipated months ago because of the emerging market stress,” Charles Collyns, managing director and chief economist for the Institute of International Finance, said in an interview in Sydney. “I think this has been a bit of a wakeup call sent by the markets.”
Policy makers including India central bank Governor Raghuram Rajan have warned of a breakdown in global coordination due to the tapering. Fed officials in December announced a $10 billion reduction in monthly asset purchases, and repeated the move last month with a cut of the same size to $65 billion.
Australia’s term as host of the G-20, culminating in November’s leaders’ summit in Brisbane, will focus on issues including cutting tax avoidance in the digital economy by multinational companies, reducing the threat of shadow banking, and promoting more private-sector involvement in infrastructure building.
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