One of the early decisions new treasurer Scott Morrison will need to make is whether to attend the IMF-World Bank Annual meetings and G20 Finance Ministers and Central Bank Governors meetings in Lima, Peru early next month.
There are strong signals that the Treasurer will prioritise domestic matters at the expense of these international meetings. But there are some compelling arguments to suggest that it would be valuable to book that flight to Lima.
Lima, Peru. (Flickr/James C.)
The first is that our economics dictate a focus on international economic issues. As a medium-sized, open economy, Australia has long been influenced by overseas economic developments. We are a capital importing country that relies on foreign savings to finance domestic investment. In the last few decades we have benefited significantly from a long and sustained push to lower tariff barriers and liberalise our financial system.
Our international inter-connectedness gives us great opportunities and exposes us to risks and vulnerabilities. The past seven years have been a tumultuous period for the global economy, and the global financial crisis demonstrated the close inter-connectedness of financial markets. Global norms affect our policy choices too, as the recent shifts in our pledges on climate change have reinforced.
The second reason Morrison should think about going to Lima is that we should be doing everything we can to contribute to strong, stable, rules-based economic governance. Our commitment to the rules-based order defines the way Australia is perceived. It gives us credibility on the international stage and helps us to punch above our weight in international fora.
Enter the G20, which has been the focal point of Australia's international economic engagement efforts in recent years. The G20 gives Australia a seat at the table with economic leaders. The G20 faces many problems, including some inherent design flaws, but it is the best the world has for dealing with collective economic challenges. This includes reform of international financial institutions, but is also true for tax, trade, energy and climate change — all global issues that cannot be effectively solved by countries acting on their own.
Rather than disengaging from the G20, Australia should be promoting more effective cooperation. The G20 faces the challenge of recapturing the momentum of the first few leaders' summits, which were geared towards responding to the global financial crisis.
The third argument for Morrison's attendance at the Lima meetings is the politics. Australia needs the G20 more than the G20 needs Australia. Not attending the Finance Ministers and Central Bank Governors meeting due to non-pressing domestic priorities would do more than just disappoint others around the table. Australia would be sending a signal that we are vacating our governance responsibilities. Our host-year obligations did not end at Brisbane. We are still a member of the governing 'troika' which includes Turkey (the current host) and China.
Short of a domestic economic crisis, failure to attend sends a terrible message about our commitment to our responsibilities to support Turkey this year. It may also undermine our capacity to engage with and support China before it announces its priorities for 2016. China's G20 presidency comes at an important time for the forum, and aligns with a crucial juncture in China's economic rise.
A final reason Morrison should go is the benefit of getting the pulse of economic thinking through interactions with the likes of Janet Yellen, Mark Carney and Christine Lagarde. As DFAT Secretary Peter Varghese recently remarked at the Lowy Institute, you can't just read The Economist to understand international economics. Similarly, what is important to Australia cannot be picked up by second- or third- hand information and reading the numbers in Canberra.
A tight cost-benefit analysis on international conferences would likely conclude that there is limited value in attending any given meeting. However, international economic engagement is worth more than the sum of its parts. In fact, it is the collective and continuous engagement over a long period that provides the benefits: relationships pick up over time, ideas are gleaned, and it is morale-boosting to have conversations with others grappling with the same policy challenges.
Rather than skipping Lima, the flight should be a top priority. The meetings provide a valuable opportunity to confirm Treasurer Morrison's worldview about Australian international economic engagement and start building the relationships that will need to endure throughout his tenure as Treasurer.