Australian Treasurer Wayne Swan said most of his Group of 20 counterparts see the global recovery as “fragile” and called on Europe to press ahead with closer financial integration and the U.S. to cut its budget deficit.
“From my initial meetings, it’s clear most of my G-20 colleagues view the global recovery as fragile,” Swan said in his weekly economic note released yesterday. “It’s critical that leaders of many major economies now get on with the necessary structural reforms needed to underpin growth.”
The world economy will grow 3.3 percent this year, the slowest since the 2009 recession, and 3.6 percent next year, the International Monetary Fund said Oct. 9. That compares with July predictions of 3.5 percent in 2012 and 3.9 percent in 2013.
Even as the U.S. has recorded more positive data in recent weeks, that 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,” he said, referring to $607 billion in federal spending cuts and tax increases scheduled to take effect in January unless the U.S. Congress acts.
President Barack Obama and Mitt Romney crisscrossed the U.S. 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 U.S. 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 G-20 summit in Mexico for meetings with U.S. Treasury Secretary Timothy F. Geithner, Federal Reserve Chairman Ben S. Bernanke, U.S. Congressional Budget Office Director Douglas Elmendorf and International Monetary Managing Director Christine Lagarde.
In Europe, Greek Prime Minister Antonis Samaras’s bid to please lenders from the European Union and IMF with a 13.5 billion-euro 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 noted 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 home, Swan is bidding for a A$44 billion ($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.”