FED:Currency reform on Swan's China chat list

AAP General News (Australia)
08-30-2011
FED:Currency reform on Swan's China chat list

By Colin Brinsden, AAP Economics Correspondent

CANBERRA, Aug 30 AAP - Federal Treasurer Wayne Swan will be reminding authorities during
his trip to Hong Kong and China that market-based currencies in developing countries are
among the structural reforms agreed to by the Group of 20 to cure imbalances in the global
economy.

China has made no apparent moves to free up its currency, despite a growing chorus
of people - including Reserve Bank of Australia (RBA) governor Glenn Stevens - wanting
some action from the world's second-largest economy to relieve pressures within the global
framework.

Mr Stevens told federal politicians last week a floating Chinese yuan, rather than
being pegged artificially low, would benefit everyone.

The treasurer agrees with such sentiments.

"Australia is a very strong believer in a floating currency and is one of the structural
reforms required in the global economy, particularly from large developing countries,"

Mr Swan told CNBC television on Tuesday.

"That is part of dealing with the global financial imbalances."

Mr Swan said China is part of the G20, where developed and developing nations agreed
to a global framework for strong, balanced and sustainable growth.

The treasurer is in Hong Kong, where he has been meeting with investors and having
talks with the city-state's chief executive, finance minister and central banker, before
travelling on to China's largest province and key Australian trading partner, Guangdong.

He is keen to get views on the global economic outlook after recent market turbulence
caused by debt and budget problems in Europe and the US, events he concedes will have
consequences on Australia's economy, although it was too early to judge the size of these
impacts.

The budget will be updated as normal to take into account any changes in the Mid-Year
Economic and Fiscal Outlook that is released towards the end of the year, but Mr Swan
reiterated that the government remained determined to bring the budget back to surplus
in 2012-13 as planned.

"Having a clear and consistent and credible fiscal policy is really important, not
just for Australia but elsewhere in the world," he said.

"We have had a demonstration on how important that can be when you look at events on
the one hand in the United States and events of course in Europe."

Mr Swan has left behind a growing debate over the future of manufacturing in Australia,
sparked by BlueScope Steel's announcement last week that it was axing 1000 jobs and closing
its export business, partly in response to the sustained strength of the Australian dollar.

But new economic data released on Tuesday showed the non-engineering construction sector
also remains extremely weak.

Australian Bureau of Statistics data showed building approvals rose by just 1.0 per
cent, seasonally adjusted, in July to 12,227 units, half the growth economists had predicted
for the month, and now stands at a whopping 15 per cent lower than a year earlier.

Housing Industry Association senior economist Andrew Harvey said this 12-month declining
trend partly reflects the weak business and consumer sentiment in the non-resource economy,
but there is now a silver lining for potential homebuyers.

"Increasingly, the RBA has no option but to either cut rates or keep them on hold for
a sustained period, and this in itself would add to the confidence of consumers and prospective
homebuyers," Mr Harvey said.

At the same time, builders have had to become competitive, "which means there are some
very good buying opportunities for those in the hunt for a new home".

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KEYWORD: ECONOMY WRAP

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