Today's economic note comes to you from the US where I'm just about to make the long journey back to Australia after attending the G20 Finance Ministers' Meeting in Washington and also the Spring Meetings of the IMF and World Bank. I met with senior figures from the international investment community in New York to promote the resilience and dynamism of the Australian economy and the continued strength of our financial system and regulatory framework. I also held one-on-one meetings with key regulators and a number of my G20 counterparts. These meetings provided timely first-hand reports on the progress of the global recovery that will help inform final preparations for this year's Budget, and will help ensure that Australia's success during the global downturn is converted into lasting gains for Australian families. The Rudd Government never lost sight of the long-term challenges facing Australia throughout the global recession, and today's note will also look at last week's historic agreement with the States and Territories securing fundamental reform of health financing, the upcoming release of the independent tax review and the announcement of the Government's tax reform program.
As I noted in an article in the Wall Street Journal last week, when the world was facing the worst economic crisis in our lifetimes, G20 members came together to stabilise the global financial system and avert a global economic depression. Now the focus of the G20 must be to consolidate and build on the economic recovery and promote the stability of financial systems. We owe it to everyone who lost a job or had a business closed during the global financial crisis to maintain momentum for lasting reform.
Friday's G20 Finance Ministers' Meeting in Washington provided an important opportunity to ensure we are making good progress on our commitments as we head towards the G20 Leaders' Summits in Canada in June and South Korea in November. This meeting was all about learning the lessons of the global financial crisis, lifting growth not just shifting growth, and getting the right regulatory settings in place.
In our communiqué, G20 Finance Ministers noted that "our Framework for Strong, Sustainable and Balanced Growth for the global economy is a key mechanism through which we will continue to work together to address the challenges associated with achieving a durable recovery and our shared objectives. In accordance with our timetable set out in St Andrews, we have conducted … the initial phase of our cooperative and consultative mutual assessment process for the Framework", and "will deliver an initial set of policy options for consideration by our Leaders at the June 2010 Summit."
We also "reaffirmed our strong commitment to fully implement our reform agenda on the timelines agreed by Leaders in London and Pittsburgh." These reforms include "stronger capital standards complemented by clear incentives to mitigate excessive risk-taking practices", "a single set of high quality, global accounting standards", "international standards with regard to compensation practices", "standards for … over-the-counter derivative contracts", "consistent and coordinated oversight of hedge funds and credit rating agencies", and "representation and governance reforms of the International Financial Institutions".
Australia's strong role in the G20 and our engagement with the IMF and World Bank have been vital in shaping our domestic response to the global financial crisis. This response has proven to be one of the most effective of all G20 countries, with a recent IMF report confirming that Australia continues to outperform the major advanced economies and is a world leader in the global economic recovery.
Last week's World Economic Outlook from the IMF notes that in the context of an uneven global recovery, "Australia and the newly industrialised Asian economies are off to a strong start and will likely stay in the lead." The IMF forecasts that Australia will grow by 3.0 per cent in 2010 and 3.5 per cent in 2011. According to the IMF our growth outlook is stronger than that for other advanced economies as a whole, which are forecast to grow collectively by 2.3 per cent in 2010 and 2.4 per cent in 2011, after contracting by a record 3.2 per cent in 2009.
While these forecasts are welcome, they are no cause for complacency. The global economic recovery remains fragile, with the IMF noting that while the recovery is advancing solidly in emerging and developing economies, it is advancing tepidly in most advanced economies.
Before flying out to the US on Wednesday morning, I participated in the COAG negotiations on health reform with the PM and our state and territory counterparts. These discussions started Monday morning and didn't finish until we reached an historic agreement on Tuesday that will deliver the most significant reforms to our health and hospital system since the introduction of Medicare.
Seven States and Territories agreed to the Commonwealth becoming the dominant funder of the nation's hospital system, with the Rudd Government to continue discussions with the WA Government over the period ahead. Under this historic agreement, the Commonwealth will become the majority funder of public hospitals and fund all GP, primary care and aged care services.
Without essential reform, the pressures of a growing and ageing population and the rising cost of health services, technology and drugs would have seen spiralling health costs consume the entire revenue raised by state and territory budgets. Tuesday's agreement puts health funding onto a more sustainable footing and will mean better health and better hospitals for working families across Australia.
As part of this fundamental reform, the Government will provide additional funding from 1 July 2010 of $5.3 billion over four years. This will deliver tangible improvements to the health system, including 1,300 new sub-acute hospital beds and 2,500 new aged care beds, over 6,000 new doctors, emergency department waiting times capped at four hours, elective surgery delivered on time for 95 per cent of Australians, and other initiatives in areas like mental health and diabetes.
We haven't been distracted for one moment from the long-term challenges like health reform and tax reform, despite the global recession and Australia's success in staring it down. This Sunday I'll be releasing the report of the Australia's Future Tax System Review and also a set of initial policies. A lot of hard work has gone into this tax reform program, which will be all about building a fairer and simpler tax system for Australians and making our economy stronger.
Before signing off, I want to mention that today's economic note has come to you a day later than usual out of respect for one of the most significant days in the Australian calendar – ANZAC Day. I commemorated this solemn occasion in Washington, where I had the honour of addressing the ANZAC dawn service at the Korean War Memorial on the National Mall. I'll also be speaking at a Deployed Soldiers Welfare Association lunch this Friday in Brisbane, which has special significance for me stemming from the experiences of my grandfather and father during and after the First and Second World Wars – experiences shared by so many of the Australians who we honour at home and around the world on ANZAC Day.
Treasurer of Australia
Monday 26 April 2010