Europe must do more to fix debt: Australia

Mining-powered Australia was the only advanced economy to dodge recession during the global downturn due to the resilience of its resources exports to Asia, but it is feeling the headwinds from Europe's unresolved debt crisis.

Swan said Australia had already seen AU$140 billion “ripped from government revenues due to global instability” and urged Europe to take credible and rapid action to put their budgets on a sustainable, longer-term footing.

“There is no doubt the active intervention of the European Central Bank — in particular extending the maturity of its lending to European banks — has helped to calm sentiment in recent weeks,” he said in a statement to parliament.

“The agreement of a new fiscal compact for Europe is also a step in the right direction. But more is needed given the scale and significance of the problems that Europe faces.

“Economic growth in Europe is crucial to achieving debt sustainability. But to achieve stronger growth, Europe must embark on a wide ranging package of structural reforms.

Swan added that “these are the tough reforms which Australia has long since introduced — like opening up sectors to competition and reforming pension systems.”

Swan will attend the G-20 finance ministers meeting in Mexico later this month where he said he would push for more funding for the International Monetary Fund, bolstering calls by the organization for some US$500 billion in extra financing.

The IMF, which is part funding the bailout of a string of eurozone nations, wants additional cash to help it deal with future public debt crises.

“A global firewall — in the form of an adequately resourced IMF — alongside a strengthened European firewall will also boost confidence and prevent contagion spreading from Europe to the rest of the world,” Swan said.

“This is the message I will take to Mexico.”

While the Australian economy remains on track with what Swan said was solid growth, low unemployment, contained inflation, and strong public finances, he warned that “no economy remains untouched from the fallout from Europe.”

“We've seen global turbulence create volatility in our share market, dampen confidence and unsettle consumers and businesses,” he said.

He also highlighted a strong Australian dollar pressuring trade-exposed industries, such as tourism and manufacturing.

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