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Tuesday, 19 October 2010
Page: 669

Dr LEIGH (2:37 PM) —My question is to the Treasurer. Treasurer, why is a floating exchange rate important to the resilience of the Australian economy?

Mr SWAN (Treasurer) —I thank the member for Fraser for his first question and congratulate him on his first speech as well. There has been a lot of debate about floating exchange rates or market based exchange rates, particularly given how strong the Australian dollar is. Of course, the Australian dollar reflects the strength of the Australian economy relative to other developed economies. In particular, it reflects very high commodity prices, the highest commodity prices in over 60 years, and it reflects the dynamics of international currency markets. It does make life more difficult for many of our exporters. It makes it difficult for many in agriculture, manufacturing, tourism and education. But of course our economy has benefited greatly from a floating exchange rate over the past 25 years. It has been a very important shock absorber for the Australian economy. It is one of the reasons we have had 20 continuous years of economic growth. No other advanced economy can claim 20 consecutive years of growth. You can see the Reserve Bank today, in its minutes, talking about the beneficial impact on prices at the moment from a strong dollar. A strong dollar has enjoyed bipartisan political support in this House. That has been a good thing, because that is vital for the confidence of global investors and global financial markets. Internationally, we have been a supporter of market based exchange rates. It has been very important that, over the last two years, we have not seen any real outbreak of protectionism, particularly amongst our G20 trading partners. Because, if that were to occur, that would be profoundly damaging to all of our country but particularly to our great exporting regions. There is a debate about how we can get greater flexibility in currency markets going on within the G20, as well as a debate about what other structural reforms must occur in the global economy to rebalance a global economy so we can have sustained growth over time.

I think that, as we go forward to the G20 finance ministers meeting this weekend, we would all like to see a commitment to greater flexibility, particularly in currency markets. Because if we do not get that then this debate may descend into another bout of protectionism—the race to the bottom—and I do not think we want to see that. Countries like Australia would be major losers if that were to occur in the global economy. So there is a responsibility as we go forward, particularly through the G20 process, to make sure that the structural reforms that are required in the global economy do come through and of course greater flexibility in exchange rate regimes are a very important part of that.

I congratulate the shadow Treasurer for recognising yesterday in this House how important flexible exchange rate regimes are. Unfortunately, the alternative shadow Treasurer does not agree with him. The member for Goldstein advocated direct intervention. Of course, the member for Goldstein would be better served by heeding the remarks of his colleagues rather than seeking—

Mr Pyne —Mr Speaker, I would ask you to rule that to talk about the frontbenchers on the opposition side is not directly relevant to the question that the Treasurer was asked.

The SPEAKER —The Treasurer has concluded?

Mr Robb —He’s concluded telling lies!

The SPEAKER —Order! I will first deal with the member for Goldstein. I ask that he withdraw.

Mr Robb —I withdraw, Mr Speaker.