PM: Today, 20 governments from the 20 largest economies in the world have agreed on a global strategy for global economic recovery, with real commitments against real timelines.
It's been Prime Ministers and Presidents who have struck this deal, but it's small businesses, tradies and young people who will benefit from it over time because global action is necessary to support local jobs.
On stimulus, what governments have agreed is to do whatever it takes to restore growth.
On financial regulation, real changes have occurred. Today's agreement begins to crack down on the sort of cowboys in global financial markets that have brought global markets undone with real impacts for jobs everywhere.
Also, on executive remuneration, what we have done today is take further action. We haven't resolved the whole question of risky behaviour by financial institution executives being rewarded by excessive payments, but we have made a significant and first step, and I would draw your attention to the fact that the regulators now, through this global agreement, begin for the first time to cast their regulatory net over remuneration packages for financial institution executives. I'll come to that in a minute.
Third point concerns the IMF. In a worst case scenario, the International Monetary Fund is the thin blue line between failing national economies and global financial chaos. And the key has been to make sure that the IMF has the resources necessary to act. And what we've done today is to ensure that is the case.
Let me go to these measures in some detail. Firstly on the question of stimulus and growth. I draw your attention to paragraph 10 of the Communiqué, where it says that last month the International Monetary Fund estimated that world growth in real terms will resume and rise to over two per cent by the end of 2010, and further goes on to say this, and I'll quote the Communiqué: “We, the leaders of these 20 major economies commit today to take whatever action is necessary to secure that outcome.”
Furthermore, what we call upon is for the International Monetary Fund to assess the impact of the actions that we have taken and critically also to assess what further global actions are required. This is an important commitment on the part of all the economies, all the governments represented around the table.
Second, on the question of toxic assets. As I've said on many occasions before, both here and the United States, and back home in Australia, dealing with toxic assets in the balance sheets of the world's biggest banks is the core of the economic problem. Extracting them is the core of the economic solution. And then, the recapitalisation of those banks to restore global private credit flows. And this was a consistent view across most of the heads of government represented in the G20 meeting today.
Drawing your attention to paragraph eight of the Communiqué, it goes again to the whole question of adopting an international framework for dealing with impaired assets. It goes on to say we are committed to take all necessary actions to restore the normal flow of credit through the financial system and ensure the soundness of systemically important institutions, implementing our policies in line with the agreed G20 framework for restoring lending and repairing the financial sector.
Therefore, these 20 governments through their heads of government have committed themselves to this international framework for toxic asset management, one which the Government of Australia was, among others, instrumental in shaping before the G20 Finance Ministers meeting a couple of weeks ago.
Thirdly, on the question of the International Monetary Fund, let me again draw your attention to that section of the Communiqué, in particular to paragraph 17. And the funds which are now committed to the international financial institutions. Some $850 billion:
* $500 billion to the IMF, a trebling of its resources;
* $100 billion for the various development banks around the world including the Asian Development Bank within our own region;
* On top of that, $250 billion by way of trade finance facility to continue to support global trade.
* Also, we have a further $250 billion provided to global liquidity through a further, through a general SDR allocation which is referred to in paragraph 19 of the Communiqué.
What I would point to is this. These amounts of money, these amounts of loans are necessary to equip the International Monetary Fund, the global financial policeman, with the money necessary and the loans necessary to support economies around the world where they run into major systemic problems, and prevent those systemic problems for them cutting across and affecting the rest of the global economy.
Absent those resources, as I've said a number of times before, there's a grave problem of a crisis in confidence again emerging in financial markets about the inability of the IMF to act in the event of major failures in Central and Eastern Europe or elsewhere in the emerging market world, the emerging economy world.
This is a major decision to deliver a major new amount of loan funding globally to the IMF to do its job in the future to reduce the risk of further financial failure in the world spreading across the entire global economy again, and worsening the recession we currently have across the world.
If I could also draw your attention fourthly to what the Communiqué has to say about strengthening financial supervision and regulation. In particular, I draw your attention to paragraph 13 and 14 and 15. What we say there clearly is that in the view of these governments, confidence will not be restored until we rebuild trust in our financial system. And it goes on to answer the question as to how that should occur.
And that answer is delivered by G20 governments concluding that we need systemic cooperation and greater consistency between governments in providing effective global financial regulation for significant financial institutions.
And within that principle in para 15 and most significantly in the attached document, Strengthening Financial Systems, there are detailed commitments against detailed timelines in each of the following areas - the future work of the Financial Stability Board which now represents a wider membership; furthermore, the requirement for the FSB, the Financial Stability Board to collaborate with the International Monetary Fund to provide early warning of macro-economic and financial risks.
Furthermore, through the new system of supervisory colleges to provide appropriate new macro-prudential analysis and oversight for those institutions across the world, which are of significant size.
Furthermore, to extend regulation and oversight to all systemically important financial institutions, and most critically, instruments in markets - that is, the whole range of those financial innovations that we have seen in recent times which have escaped the purview of the regulators.
And furthermore, I draw your attention to this one - to endorse and implement the Financial Stability Forum's tough new principles on pay and compensation, and to support sustainable compensation schemes and corporate social responsibility for all firms.
Turning to the attached document in terms of what does that mean on executive remuneration, I draw your attention to the entire part of the attached Strengthening Financial System Declaration which deals with compensation. In particular, what it has to say about the international banking committee, otherwise called the Basel Committee, integrating the following principles in their risk management guidance by autumn of 2009, across the global financial system.
What are those principles of guidance?
One, firms' boards of directors to play an active role in design, operation and evaluation of compensation schemes.
Two, compensation arrangements including bonuses to properly reflect risk and timing and composition of payments, to be sensitive to the time horizon of risks. Payments should not be finalised over short periods where risks are realised over long periods.
Third, firms to publicly disclose clear, comprehensive and timely information about compensation.
And fourth, supervisors will assess firms' compensation policies as part of their overall assessment of their soundness. Where necessary, they will intervene with responses that can include increased capital requirements.
These are four new concrete sets of principles to be anchored into the global financial regulatory system, concerning executive remuneration and risk in significant financial institutions worldwide. National regulation on this is inadequate. Global regulation on this is what is required given the global nature of the current financial system.
I conclude on this. On the question of trade, the fifth area where we have been active on this broad agenda of economic policy considerations in the G20 meeting today, the provisions contained in paragraph 22 of the Communiqué.
In particular, because governments gathered here today in London have concluded that a protectionist outbreak would undermine fundamentally the prospects of economic recovery, that it is necessary to extend further our combined commitment not to engage in further protectionist measures through until the end of 2010.
Furthermore, to require the WTO to report on any violations of the same. And furthermore, to support trade itself through a recommitment to reaching an ambitious and balanced conclusion to the Doha development round which is urgently needed. On top of these, a $250 billion new trade finance facility to assist the restoration of normal trade flows involving the developing economies.
Ladies and gentlemen, these are the five key elements of this global strategy for global economic recovery. Each is part of a whole, each is important in itself, each one without the other would be incomplete.
The last thing I would say is this. Many people coming into this G20 summit said that it would divide right down the middle, between those who wanted one thing or another, that there was insufficient political consensus to drive this important global summit towards conclusion.\
My experience of the summit today and of the chairmanship of Gordon Brown, the Prime Minister of the United Kingdom, and supported by heads of government around the world led by President Obama, was an overwhelming drive towards achieving a real outcome with real commitments and real timelines in order to provide a pathway to global economic recovery.
Everyone said around the room there are no silver bullets in this. But you know, it's very easy to point to a glass and say it's half empty. What I would say to you in terms of what we have delivered today is an outcome that is more than half full. There's more work to be done. This gathering, this meeting, this summit will continue and we'll meet again by year's end.
JOURNALIST: Mr Rudd, can I ask you just on the IMF and the bolstering of its resources, has Australia increased its contribution and by how much and in what form?
PM: As I've said and the Treasurer's said on a number of occasions, Australia as always in the past and will in the future, consistent with previous government practices, make a contribution consistent to its fair share, first point.
Second is, the form through which this assistance is provided is not by way of grant, it's by way of loan. And furthermore having provided a loan to the IMF, it doesn't follow automatically that that lending facility is actually used, and if it used it doesn't affect the Budget bottom line. Why? Because an asset then is created on the other side of the ledger.
The broad scope of what the previous government engaged in following the Asian financial crisis, in terms of the individual financial loans provided to national governments, when combined with that which was provided to what's called a new arrangement to borrow back in '97/98, was something like $US5 or 6 billion.
We haven't yet settled numbers and the reason is, our contribution will be contingent on the number of other states contributing and how much they contribute and that will be not known until the spring. What we've agreed upon is the quantum.
JOURNALIST: (inaudible)
PM: Well, in terms of the question of China's contribution, quantums on that have not yet been set by the Chinese Government, as I'm advised, and the question of future voting rights within the IMF for China and other countries who have contributed to the IMF would be resolved consistent with the Communiqué by January 2011.
JOURNALIST: (inaudible)
PM: Well, he may be referring to a different facility to the one that I've just been referring to. But I'm saying the voting rights question is not resolved until 2011.
JOURNALIST: (inaudible)
PM: Well, the Finance Ministers said back in two weeks ago here in London, the Finance Ministers said that they had brought forward the resolution of the voting rights question for China to January 2011. That has been reaffirmed, or affirmed at a head of government level in this Communiqué. And I'm sure there will be progress between now and then as I've indicated in my early remarks.
JOURNALIST: Has today's agreement killed off the let it rip economy, rampant capitalism, and put the neo-liberals to the sword, and have we seen an actual change in the nature of world capitalism today?
PM: I think what you've seen Matthew is governments around the world, both from the developing economies and the developed economies, out there in support of open markets. And with this conditionality attached - properly regulated open markets. And you see that language reflected also in the opening paragraphs of the Communiqué. And that is the overwhelming sentiment of heads of government.
And discussions which I've had with them privately and collectively last night when we met at Downing Street and here again today, it's how do you maintain global public confidence in a system of open markets which ensures that those open markets are there for everybody and not just for some. And that is a strong and unifying sentiment.
That is why for example, you see in the early parts of this Communiqué, a clear cut statement that what we are seeking to do is to enhance jobs around the world. That is, what affects people, what affects working people. I quote you from third paragraph of the Communiqué: “Our global plan for recovery must have at its heart the needs and jobs of hardworking families.”
So I answer your question Matthew by saying it's getting the balance right. A properly regulated financial system which delivers the results in terms of employment in the economy, and also provides a proper balance of regulation for the future and one I've referred to at some length, which is regulation for financial executives in the financial services sector.
JOURNALIST: Prime Minister Rudd, how does this Communiqué, how will it impact Australia's financial sector salaries and bonuses?
PM: Well, as you know in Australia we've already made a clear cut statement about what we expect in terms of shareholder approval of salary arrangements in firms which have executive remuneration arrangements -
JOURNALIST: Non-binding though.
PM: No, hang on, just about to go on to the rest. Pointing out what we've done domestically so far. And secondly, on top of that specific undertaking, we've made a formal reference of course to the Productivity Commission through Allan Fels, and that has some time to report.
The advance here is as I described before, for significant firms in the financial sector, significant financial institutions, for these principles that I referred to before to be incorporated in what is called the Formal Risk Management Guidance of the Basel Committee, global committee responsible for setting the rules here, by autumn of 2009.
They therefore, once adopted, will flow back into significant firms within the Australian financial system. These two exercises of ours, one local through the inquiry which is obviously underway in Australia, and secondly through these obligations which we've taken on internationally, will make for a difference.
And I can just go to one core difference. It goes to remuneration systems in the short term and risk calculations over the long term. What this clearly says is that these things have to be harmonised. In other words, a set of remuneration arrangements for a company executive, a finance sector executive, has to be made consistent with a risk analysis over the long term, not just a short snapshot of time. Over here.
JOURNALIST: Just on the role, the influence which Australia has had at this G20 summit. You wrote to your counterparts before coming here, putting forward your proposals. I guess, putting your modesty to one side, how much or -
PM: There was general guffawing at that point. Led by Farr by the way.
JOURNALIST: With this deal struck today Mr Rudd, with this deal struck today, how much of it is a reflection of what you put forward?
PM: I think in all honesty, this has been a contribution from a whole bunch of governments in a whole bunch of different ways. I mean, I've seen so many iterations, so many versions of communiqués over recent times and bits of communiqué, that everyone's made a contribution.
What I was trying to do way back when, when I addressed the UN General Assembly in September last year, as saying we have a problem. What I said in that address was, here is a bunch of things we need to be doing and I spoke about it at some length. There's been a lot of work by us done internally since then, a lot of work done by us internationally since then. You're aware that we submitted working papers on toxic asset management across the global financial system, and on the reform of the International Monetary Fund, and other contributions elsewhere.
We've been one of a number of countries, but I've got to say in due deference to our host, Gordon Brown, his energy and his activism in pulling all these threads together across 20 governments who are not in the habit of working at this level of detail with each other in the midst of a global financial crisis deserves to be recognised and applauded.
JOURNALIST: Mr Rudd, there are allegations in newspapers across Australia today that your conduct on a VIP flight reduced an air force hostess to tears. What happened?
PM: As I recall it, there was a flight I think from Port Moresby, and I had a discussion with I think one of the attendants about the provision of food. Didn't last very long. And if anyone is offended by that, including the attendant concerned of course, I apologise. And my recollection of the incident concerned is that, some time during the flight I also indicated to a member of the crew, that was just it, you know it was, um, that was not to worry about it. I think that was my language.
JOURNALIST: Did you apologise (inaudible).
PM: I said to the member of staff not to worry about it. But as I said if anyone took offence, of course I apologise for it. Prime Ministers make mistakes. I'm sure I've made mistakes, that would be one of them. And if people have been offended, I apologise for it.
JOURNALIST: (inaudible)
PM: I didn't observe any.
JOURNALIST: Mr Rudd, what do you say to the plumber in Parramatta Road, I mean about when we know this is going to work, this summit?
PM: Sorry what happened down there?
JOURNALIST: What's your message to the plumber in Parramatta Road about when we're going to know that this summit has worked or not?
PM: What the summit realised and concluded in discussions both informal and formal was here is how much you can do nationally to deal with the problem of jobs and economic activity on the home front, and here's what must be done internationally to make a difference. Unless you're doing both these things together, ultimately it doesn't work.
JOURNALIST: (inaudible)
PM: I'll come to that. What I refer to again is the reference on stimulus at the beginning of the Communiqué in para 10 which points to our advice from the IMF about world growth resuming in real terms to over two per cent by the end of 2010, and committing ourselves to take whatever action is necessary to secure that outcome.
This is therefore a concrete plan by us to try and reduce the impact on joblessness in all our countries including Australia, and to improve the level of stimulus and other measures in the economy.
But I would say very loud and clear that there are no silver bullets in this. This is about reducing the impact of the global economic recession. It's not about immediately removing it. I just want to be upfront with people about that. It's parallel to what I say within Australia which is our actions on stimulus and interim interventions in financial markets are about reducing the impact of the global economic recession, rather than eliminating it. I don't believe you should mislead people.
But I would say this, the core of the economic problem is what's happened to the world's biggest banks. And dealing with the core of that problem, what we have been able to do is advance a set of principles for dealing with toxic assets on bank balance sheets to try and restore health to those banks over time, in a consistent way across the world in order to restore private credit flows and secondly, equip the International Monetary Fund to deal with any second round effect of toxic assets coming out of other economic problems elsewhere in the world. These are designed to be measures to deal with the core of the problem.
The other measures that we have embraced are dealing with the effects of the problem. But we must be dealing with the core if we want to have a real prospect of getting out of this global economic recession, because that directly affects plumbers on Parramatta Road, plumbers right across the world. All forms of work, all professions, all trades.
The thing about this is during a gathering with the Kind of Saudi Arabia, the President of Communist China, the President of the United States and representatives from other major developing countries, everyone has a sense, a real sense that the core of their challenge is to achieve recovery in support of jobs in their economies and they know it can only work if we work together.
JOURNALIST: Prime Minister at the last conference in Washington you resolved to combat protectionism and you also resolved to try and complete the Doha round and the World Trade Organisation did monitor what happened and 17 of 20 economies went ahead and introduced protectionist measures. Essentially, what is different in what you're saying today to what you said then and don't we not just have to watch what the Governments of the world say but what they do?
PM: The reference I'll draw your attention to is para 22, which says this: “We reaffirm the commitment made in Washington to refrain from raising any barriers to investment or to trade in goods and services, imposing new export restrictions or implementing WTO-inconsistent measures to stimulate exports. In addition we will rectify promptly any such measures.” Further commitment and furthermore “extend this commitment to the end of 2010”.
I would argue that the absence of that commitment back then, which was only four months or so ago, in the absence of WTO monitoring since then, we would have had a far, far worse and more serious outbreak of protectionism across the world as has happened in previous economic downturns when there was a less robust set of trade institutions acting as policemen around the world.
Is it good now that there have been breaches? Of course it's not but none of those individual breaches are terminal. What I would worry is everyone stepping back and saying it's open slather. So what I say is what we can as heads of Government do is reduce the problem, reduce the natural impulse to protectionism in certain countries to an absolute minimum. And I think that's the right way ahead.
JOURNALIST: Mr Rudd, can I just go back to Emma's question on, Emma Alberici's question on financial, you know whatevers. I just want to, I'm just trying to narrow-
PM: (inaudible)
JOURNALIST: Is it your domestic approach, is it right to say your domestic approach is to wait until the Prod Commission Report is in before you'll do anything legislatively domestically? Is that, is that what you were saying?
PM: We said that we would obviously wait for the conclusion of the Alan Fels report and that's the logical thing to do. I note here for the record that this Communiqué commits us to a set of actions which include the Basel Committee integrating these principles I referred to before in their risk management guidance by autumn 2009. If therefore those principles require us to take further domestic action, legislative or otherwise, of course we will.
What I said I think earlier in response to this question here, these two exercises must proceed in tandem with each other because we have financial institutions which operate in a global financial environment.
So what we've achieved and I draw your attention very much to the contents of this compensation section, this is the first time that global regulators have stepped in to, you know, wild corporate cowboy behaviour as far as their remuneration is concerned, completely detached from the risks that they were creating for the whole financial system.
JOURNALIST: (Inaudible)
JOURNALIST: If I can just ask-
JOURNALIST: Bob Geldof told us that you were going to go to .7 today, is that right?
PM: I haven't spoken to Bob Geldof. Our commitment is to go to 0.5 by 2015, as I said at St Paul's Cathedral a couple of days ago, but we remain rock solid on that commitment and we'll honour that commitment because let me explain why, it's not just the right thing to do because what is invisible to many of us here are the impact of this global financial crisis and economic crisis on the developing world.
We had a moving presentation today from the President of Ethiopia about what's happening across Africa right now. And the impact are not about people losing their jobs, which is bad and it's horrible, it's about people losing their lives through the increase in starvation which is occurring through the food security crisis which is unfolding.
So we'll honour our commitments and it is important that other Governments do the same.
JOURNALIST: Prime Minister if I could just ask-
PM: There, there. Actually this person, you haven't had a question.
JOURNALIST: (inaudible)
PM: Well that's what the IMF has said globally, it's going to be a tough long haul for Australia and what I've said back home as what we've reflected here abroad is that we will take whatever measure, whatever action is necessary to continue to support growth and jobs in what is a spectacular economic downturn.
In our dinner last night I reminded all of my colleagues from around the world what the OECD data had to say 24, 48 hours ago. Those are horrendous numbers, absolutely horrendous numbers for the global economy. A contraction projected for the developed economies of 4.6 in 2009, for the global economy from memory 2.7 thereabouts and the unemployment consequences as a result. These are bad numbers, therefore it places the wood on us to do whatever is possible on stimulus on the one hand and our commitment to sustain that in the future as far as the global economy is concerned but critically through coordinated interventions elsewhere in the economy as well and mainly to return our banks to health and the restoration of private credit flows in the future. Sue.
JOURNALIST: (inaudible)
JOURNALIST: One of the biggest transactions across the board in Asia of course is Chinalco's approach to Rio Tinto and it's under the Foreign Investment Review Board. Would you support such an acquisition with Chinalco and what would be the timeframe for such a decision?
PM: Let me re-say to you what I would say domestically in Australia. These are matters which are always assessed in the national interest. The decision maker in this case in the Treasurer of Australia. There is a process underway which is entirely consistent with our laws, our internal procedures, it will take some time to work through. Our decision will be in the national interest and we will spend some time arriving at those conclusions.
JOURNALIST: Prime Minister if I can just-
PM: Can I have a question back here from someone who hasn't had one?
JOURNALIST: Are you prepared to give up any of Australia's quota at the IMF so that China and other countries can [inaudible]. And secondly are you prepared now to (inaudible) to not introduce any more industry assistance plans or other initiatives in Australia that would be in breach of the spirit of your trade commitments here?
PM: On the question of industry assistance, we have always been intensely mindful of a compatibility of any actions we take domestically with our obligations under international trade law and that has been the case with all of our deliberations internally so far and we will do so into the future.
On IMF reform we will work through the detail with the international community in the months ahead. This will be complex and as I said the conclusion of the process isn't until January of 2011.
JOURNALIST: There's a report in one paper in Australia today that your office identified that last year on a trip to Beijing there was an attempt to spy on you and your staff, to tap into emails and mobile phone networks, what do you have to say about that allegation?
PM: No security concerns that I'm aware of have been raised with me and my office in relation to that particular trip to the Beijing Olympics.
The other thing I'd draw your attention to is this, the Government's National Security Statement which was released in December of last year, the Government will always remain vigilant in relation to cyber-security and will ensure our agencies are always properly equipped to detect and thwart potential cyber-attacks. The National Security Statement clearly identified the threat of cyber-attacks in Australia and clearly stated the following: “This challenge must be and will be met with full vigour” unquote.
On the specifics of any individual national security circumstances I don't comment on the generics, which is that response by us in the National Security Statement, I believe it speaks robustly for itself.
JOURNALIST: (inaudible)
PM: As I said on specific, on the particular matter that you raise which goes to the Beijing Olympics, I am not advised that we have any such advice from the Australian security authorities, that's the first point. The second is our robust generic approach, the generic approach to the whole question of cyber-security and I've got to zip. Oh, Malcolm you hadn't asked a question, I'm sorry.
JOURNALIST: (inaudible) just going back to the earlier question, do you have a bad temper?
PM: Oh right. The, all of us are human, I'm human, I'm not perfect, and as I said before if I upset anybody on that particular flight I am really sorry, I apologise for it and, as I said at the time to one of the staff on the plane, that's it. It's, well Malcolm I think we've, as I said we're all human, we're all human, we all make mistakes, your Prime Minister included. See you.
[ends]