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Business News/ News / World/  Difficult to see how Europe will overcome current challenges: Wayne Swan
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Difficult to see how Europe will overcome current challenges: Wayne Swan

The Australian deputy PM talks about the global economic crisis and G20’s role in the recovery process

The G20 showed that it could bring together policy makers from individual countries to cooperate on the growth agenda and there is a need to get a bit more of that urgency back, says Swan. Photo: Subhav Shukla/PTI (Subhav Shukla/PTI )Premium
The G20 showed that it could bring together policy makers from individual countries to cooperate on the growth agenda and there is a need to get a bit more of that urgency back, says Swan. Photo: Subhav Shukla/PTI
(Subhav Shukla/PTI )

New Delhi: Four years after it was set up to deal with the global financial crisis, the G-20 needs to inject a sense of urgency into its plans and programmes to make itself relevant and resolve the issues dragging down the world economy, Australian deputy prime minister Wayne Swan said in an interview. On a two-day trip to India to build on the momentum generated by the visit in October by Prime Minister Julia Gillard, Swan spoke about the global financial crisis, his assessment of the recovery process and moves by the Australian government to review the transfer pricing policy that could affect Indian businesses operating in that country. Edited excerpts:

In your departure statement, you gave a very upbeat picture about the Indian economy.

I am optimistic about this region as a whole. Of course there will be bumps along the road for individual countries and in regional growth just as there are in the global economy and the challenge in our region is that we have carried the great bulk of global growth over the past few years. But what’s occurring in Europe and to a lesser extent in the United States has started to weigh heavily on our region and the consequence of that has been lower global growth than we would like.

From a G-20 perspective, we need to be doing much more to lift global growth but within that framework we have to acknowledge that this region will continue to supply an increasing proportion of global growth as we go forward because it is hard to see how Europe is going to come out of challenges it faces for some time.

I am more optimistic of what is occurring in the US once they get through negotiations over the fiscal cliff and I have a reasonably optimistic view about China, so my view about the region is, irrespective of bumps along the road, that we are going to continue to grow in the medium term strongly.

And the question is how–whichever country we are located in–to increase our growth potential and I think there is enormous potential to do that here in India. Your government is responding with a structural reform agenda to lift growth. But India, as is China and indeed our own country, has been affected by this global slowdown, which is weighing heavily on parts of our region.

What is your assessment of how long the global recovery process will take?

We will have to observe what happens in the United States over the next couple of months. Nobody can predict that and I am not going to engage in hypotheticals. But what we have to do as policy makers is to take a long-term view about what is going on, what are our strengths, what are those issues we need to fix.

We have got to lift our growth overall, I think, in the region. There is enormous scope for productivity across the region and there is a real hunger across the region to put in place a range of policies to lift productivity potential. For example, I know the government here is looking and talking with many other governments in the region about what we can do through bodies like the G-20 to encourage much more investment in critical areas like infrastructure, for example.

None of these things are things that will happen tomorrow but they are very important matters to be taken on board by policy makers so that we can set things right for the long term. The reason our government decided to publish the Asian century white paper is precisely because we are optimistic about the region and indeed about India as a country and a society.

When the G-20 was set up, it seemed to work pretty well but now its seems to have lost momentum. Is it still as relevant?

Conditions are different now than when the G-20 came together at the end of 2008 nearly 2009. I think the G20 showed that it could bring together policy makers from individual countries to cooperate on the growth agenda. My view is that we need to get a bit more of that urgency back into our discussions and concentrate pretty clearly and squarely on a growth agenda that delivers jobs and lifts living standards and that takes us back to the discussion, not just about the short term but the medium and the long-term policy settings that deal with global financial imbalances and lift growth in developed and developing countries. It’s an imperative in a country like India, it’s imperative in many parts of Europe where unemployment is very high. So I would like to see the G20 focus as much as we possibly can on lifting growth and the policies that are required–short term, medium term and long term.

Which are the countries that need to bring urgency to the G-20 table?

I am not singling out any particular country. The question was what do we do four years on? What I have said to you is what I think we should do, we are all going to do it. I know your government is quite in interested in ensuring that issues like the planning, the funding of critical economic infrastructure are very much to the fore of that structural agenda.

The Australian government is having a look at transfer pricing rules. What has prompted this?

I think there are a variety of things. There is transfer pricing in what you call the established business environment that we are in now and there is a whole series of issues that are to be seen in the context of new and emerging industries outside the traditional industries and yes we are having a good hard look—as are other countries in the world—at how to get the balance right to make sure that corporates pay their fair share in the countries in which they are operating.

Governments where they operate get a fair return in terms of tax that reflects economic activity within their borders. These current tax policies, whichever country in the world it is, are challenged by technology, new business models and sometimes they are challenged by sheer bloody mindedness from one or two companies who don’t want to pay taxes to anyone.

It is not just us—the OECD has a comprehensive agenda in this area and those of us who are members are working through those issues with them. So I see this as an international issue, not a national issue, in which everyone has an interest to see we have the framework right. The framework here is not to punish profit making, the framework here is to make sure that when wealth is created and profits are made, the tax systems of the countries in which it occurs are respected.

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Published: 12 Dec 2012, 06:40 PM IST
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