--Australia Treasurer says grave consequences if U.S. doesn't
address "fiscal cliff"
--Wayne Swan says Group of 20 concerned about risk of U.S.,
Europe policy inaction
--Mr. Swan says G-20 must focus on jobs and growth
By Robb M. Stewart
MELBOURNE--The looming "fiscal cliff" in the U.S. poses the
biggest threat to a nascent global economic recovery, Australian
Treasurer Wayne Swan said Thursday, as he urged the eventual winner
of this month's U.S. election to prioritize dealing with it.
"The global economic consequences could be grave indeed if
action is not taken after next week's election to address the
looming fiscal cliff," Mr. Swan said in a speech at an economic
conference in Melbourne.
"Trillion dollar deficits are not sustainable and quantitative
easing is not a long-term solution."
A series of tax increases and spending cuts are mandated to
begin next year unless Congress strikes a deal to avoid them, a
situation that has become known as the "fiscal cliff" in the
U.S.
The independent Congressional Budget Office has estimated that
the cliff, left unattended, could see the U.S. economy suffer an
annualized contraction of 2.9% in the first half of next year and a
jump in unemployment, which Mr. Swan said would drive the U.S. back
into recession and "strike a savage blow" to the fragile global
economic recovery.
Members of the Group of 20 industrial and developing nations,
who are set to gather in Mexico this weekend, are concerned about
the risk of policy inaction in the U.S. and in Europe, Mr. Swan
said.
He plans to call on his G-20 counterparts to focus on jobs and
growth as they work to get their economies on track.
The G-20 meeting must focus on medium to long-term fiscal plans
that set priorities to improve productivity and competitiveness and
restore market confidence, he said.
"In Mexico, I will be imploring my colleagues to support jobs
and growth in the near term while ensuring their medium-term
budgets are put on a more sustainable footing," he said, adding a
global growth rate of about 3% was insufficient.
The treasurer leaves Friday for this weekend's G-20 meeting in
Mexico City, after which he plans to visit Washington.
In his speech, Mr. Swan also said Australia's economic
fundamentals remain sound despite the sharp fall recently in prices
for iron ore, coal and other commodities that underpin exports.
"Maintaining a strong economy and sound fiscal policy has seen
increased appetite to invest in Australia," Mr. Swan said. "Where
we were once seen as an optional investment destination, Australia
is now seen as a necessary part of any portfolio, whether it be
private or public investors."
The economy, which has been cushioned from the worst of the
global economic woes due to Asia's booming demand for natural
resources in recent years, has showed signs of strain in recent
months as a slowdown in China's economic growth has weighed heavily
on minerals prices.
Australia's government last month unveiled billions of dollars
in additional savings to keep it on track for a promised budget
surplus as budget revenue has fallen. At the time, it said tax
receipts this fiscal year would be 4 billion Australian dollars
(US$4.1 billion) lower than previously forecast, prompting it to
narrow the projected surplus to A$1.1 billion from May's estimate
of A$1.5 billion.
Mr. Swan said given the current economic conditions, there is
now more room to run lower interest rates than in the past.
Concern that the cutbacks will aggravate economic weakness could
prompt the Reserve Bank of Australia to cut interest rates more
aggressively than it might have intended. That would exert downward
pressure on the Australian dollar, which continues to trade near
historic highs.
Write to Robb M. Stewart at robb.stewart@wsj.com