Australian Treasurer Wayne Swan endorsed measures in Japan, Europe and the U.S. to revive domestic growth, undercutting claims that those efforts punish smaller countries by elevating their currencies.
The European Central Bank, the U.S. Federal Reserve and the Bank of Japan (8301) “have brought stability and will help support growth,” Swan said in a statement at a Group of 20 finance ministers’ meeting in Mexico. “I know some question the spillover impacts from these central bank actions, but there is nothing more important to the global economy than to lift growth in the world’s major advanced economies.”
With benchmark interest rates near record lows, the Fed, ECB and Bank of Japan have expanded their balance sheets since 2008 to try to resuscitate growth. The fallout from the measures has included surging currencies in export-driven economies from Scandinavia to South Korea.
The Swiss central bank imposed a ceiling on the franc for the first time in more than three decades in September 2011, a year after Brazilian Finance Minister Guido Mantega said the world faced a “currency war.”
The Australian currency has soared 72 percent against the U.S. dollar from a 2008 low during the global financial crisis. Declines in the so-called Aussie in 2008, 2001 and 1998 helped Australia maintain its recession-free record since the early 1990s.
The Australian dollar bought $1.0367 late yesterday in Sydney, up 1.6 percent for the year. The sustained strength of the so-called Aussie has been supported by its increasing use in foreign-exchange reserves amid global financial strains.
“I understand the consequences of an appreciating currency against the U.S. dollar, but nothing will help support the U.S. dollar more than a return to solid growth there,” Swan said.
The local currency remains stronger this year even as Australia’s No. 1 customer, China, sees a slowdown, and weaker prices for iron ore and coking coal erode the nation’s terms of trade -- a measure of windfall gains from exports that reached a 140-year high last year.
A high local dollar and easing export prices have complicated Swan’s bid for a A$44 billion ($46 billion) swing in the budget back to the black in time for an election next year.
The government has encouraged the Reserve Bank of Australia to cut interest rates to stimulate the economy, and the central bank has delivered 1.5 percentage points of reductions in the past year. Traders are pricing in a 56 percent chance of a rate cut at today’s policy meeting, swaps data compiled by Bloomberg show.
“We have put in place longer-term measures that improve the budget over time, without impacting on growth in the near term,” Swan said, urging the U.S. and Japan to produce credible long-term fiscal plans. “This is improving our budget position over time, while also making room for important investments in our economy and community.”
After his meetings in Mexico, Swan is scheduled to meet in the U.S. with Fed Chairman Ben S. Bernanke, Treasury Secretary Timothy F. Geithner, International Monetary Fund Managing Director Christine Lagarde and Douglas Elmendorf, director of the Congressional Budget Office.
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