How Australia managed to steer clear of recession

Australia was able to avoid sinking into recession during the global financial crisis thanks to well-timed measures that prevented the creation of fiscal deficits and safeguarded its economy, the country’s prime minister, Julia Gillard said in an interview with Kathimerini, adding that during the crisis, the government adopted a growth-inducing strategy that helped businesses survive and prevented the loss of jobs.

The leader of the world’s 12th biggest economy, which will chair the G20 in 2014, spoke about Australia’s ties with Greece and the contribution of the Greek diaspora, about immigration and about the role of the newly established Hellenic-Australian Business Council. She also spoke about the Cyprus and FYROM disputes, issues that Australia must deal with as a member of the UN Security Council.

What is your assessment of the austerity path being pursued by the eurozone in dealing with the crisis?

The most immediate priority in Europe is to bolster economic growth and jobs, and to create a positive sense of opportunity for the future. Across the EU there are over 26 million people out of work – more than the Australian population. And when you see youth unemployment rates of 24 percent across Europe and around 60 percent in Greece and Spain – you are then facing a ‘lost generation’ which takes years to recover from. That is why focus needs to be placed on reforms that promote new sources of growth, a recovery in the private sector and greater financial and economic integration.

Pro-growth policies in the areas of investment, infrastructure, trade, and reform must be implemented. This will involve some politically difficult choices. However, economic reforms will only work in conjunction with commitments to reduce debt. For some countries that means more fiscal consolidation in the short term and ensuring all economies have credible medium-term fiscal strategies. The way forward on European integration is further progress on implementing a banking and fiscal union, and operationalizing the EU’s financial firewall against the crisis.

How has the economic crisis impacted Australia?

The weaker global economy saw a reduction in demand for Australia’s exports, sharp declines in asset prices and international capital becoming difficult for companies to access. When faced with this challenge, my Labour government took decisive action: we put in place a well-timed and substantive stimulus package, supported the financial system and made arrangements for businesses to keep their doors open and people in work. This, supported by monetary policy action, our flexible exchange rate and Australia’s connection to the emerging economies in Asia, meant that Australia was one of very few countries to get through the global financial crisis without having gone into recession.

Today, Australia enjoys solid economic growth, growing by more than 13 percent since 2007 in contrast to other advanced economies around the world – in fact this is our 21st consecutive year – and a relatively low unemployment rate with over 900,000 jobs created since we came to office. But we are not immune to international developments – one of the key risks to the domestic economy remains the fragile state of international economies and financial markets. And the weak global economy plus our high dollar, which is increasingly being perceived as a safe haven currency, has put pressure on certain industries and is also affecting our budget with massive revenue write-downs.

Australia is running the lowest deficit among advanced economies. Is there a lesson for the rest of us?

In Australia, our key priority has been to support jobs and growth. We’ve managed our economy so we have low inflation, low interest rates, low unemployment, solid growth, strong public finances and a triple-A rating. When the global financial crisis hit, our fiscal response was timely, temporary and targeted. We provided stimulus spending that contributed around 2 percentage points to real GDP growth in 2009 and without it we would have lapsed into recession. We then followed up with a clear set of fiscal rules to return to medium-term balance without jeopardizing jobs or growth. We have offset every single dollar of new spending with targeted and responsible matched savings since mid-2009. We have always understood that we live in challenging economic times and, as a result, we have remained flexible and responsive to changing circumstances and have never put political outcomes ahead of economic outcomes.

What does being a member of the G20 mean for Australia?

The global economy is going through a rapid transformation. As a middle-sized economy in the Asia Pacific region, Australia sees first-hand the extraordinary changes that are taking place, as China, India and other emerging economies develop. The center of global economic activity is shifting eastward and will be over central India by 2030, when there will be 3 billion new middle-class consumers in Asia.

As the only forum that brings together those economies with the major advanced economies, the G20 has a vital role to play in helping manage this transformation. The G20 played a crucial role in managing the global financial crisis. But we continue to face major challenges including the prospect of an extended period of slower global economic growth and high unemployment. That is unacceptable. We are working closely with this year’s host, Russia, to bolster global economic growth and job creation, and will use our own period as chair of the G20 in 2014 to continue this work.

We look forward to working closely with the EU and other G20 members in 2014. We will also be working to build on the G20’s achievements on issues such as trade, investment, infrastructure and development, and to reform international institutions like the IMF to make them more representative of 21st century realities.

How would you describe Australia’s role in today’s world?

The international community has a lot to offer us and we have a lot to offer the international community. We have strong, world-leading institutions, a multicultural and highly skilled workforce, and a productive, open and resilient economy, that continues to outperform our peers.

Australia plays an active part in global affairs, as demonstrated by our commitment to serve on the UN Security Council and to host the G20 in 2014.

Australia is also an active participant in key regional architecture spanning the spectrum of international security, and economic and social issues including the East Asia Summit and the Asia-Europe Meeting.

We have been a long-standing and committed member of Asia-Pacific Economic Cooperation and in promoting its free trade objectives. Our relationships with others are shaped by the unique contribution that permanent and temporary migration has made to Australian society and the strength of our diverse people-to-people links of which the Greek community has played a significant part.

How would you describe bilateral relations with Greece?

Greece and Australia enjoy an active relationship based upon strong community links, shared history, trade and strongly held values of democracy and respect for human rights. Australians remember the island of Lemnos as the base for the Gallipoli campaign. Enduring historical links were also formed from the involvement of Australian troops in the defense of Greece during World War II.

Hundreds of thousands of Australians trace their roots back to Greece and are rightly proud of their heritage. The Australian-Greek community has participated in all aspects of Australian life since the first Greek migrants arrived in the mid-19th century and is well represented in the workplace, arts, professions, politics and other areas of our society. The community also has a proud history of involvement in a wide range of welfare, cultural, sporting and social activities. The contribution that Australians of Greek descent have made to shaping our national character and values cannot be measured. Today the bilateral relationship remains strong as a result of frequent travel between our countries for holidays, study and work.

What could the recently established Hellenic-Australian Business Council achieve in substantive terms?

The Greek community in Australia is a very proud one and as someone from Melbourne – the third largest Greek-speaking city in the world behind Athens and Thessaloniki – I am absolutely aware of the contribution of that community. And the community can act as a bridge in helping to forge closer links between our two countries and regions to mutual benefit. That is why I was pleased to note the establishment of the Hellenic-Australian Business Council, the first such forum established in Greece, and wish it every success.

The activities of the Council will help forge greater links between Greek and Australian businesses, links which can facilitate improved levels of trade and investment between our countries. At present, and despite our very strong community and cultural links, bilateral trade and investment is relatively low. The Council can play an important role in assisting businesses as they look for opportunities in sectors such as shipping, energy and resources, infrastructure, tourism, food and services.

Has the economic crisis in Greece resulted in an increase of migration to Australia from this country?

The Greek Community in Australia is a proud and strong community and I have been very pleased to show my support over the last few years as prime minister at the Antipodes Lonsdale Street Glendi festival in Melbourne. I was also pleased last year to announce that the government would make a $2 million investment towards an Antipodes Center for Greek Culture, Heritage and Language in Melbourne.

On your question, statistics show there has not been any significant change in migration from Greece. Our two countries have strong people-to-people ties and many dual nationals who may travel from one country to the other. Australia’s skilled migration program is open to people of all nationalities with the qualifications and skills in demand in Australia, including from Greece. And that’s because Australia is a migrant nation – my parents came here as migrants. Our relationships have been shaped by the unique contribution that migration has made to Australian society and the strength of our diverse people-to-people links of which the Greek community has played a significant part.

Australian firm Woodside has signed an initial agreement with Israel offering its liquefication experience and marketing structure in the future export of Israeli gas. Could there be similar interest for the transport of Greece’s or Cyprus’s potential gas reserves?

Through hard work and determination, we have built a highly capable and experienced oil and gas sector in Australia. Any country wishing to develop gas reserves or gas liquefaction capacity is welcome to speak with Australian companies with expertise in this area including Woodside. The Australian government welcomes opportunities for all Australian companies to share their knowledge, expertise and investment internationally.

Finally, as a member of the UN Security Council for the next two years, how do you view the prospect of a resolution on the division of Cyprus and on the issue of the name of the Former Yugoslav Republic of Macedonia (FYROM)?

We wish peace and justice for Cyprus. Australia has demonstrated a long, ongoing commitment to helping to find a solution to the Cyprus dispute and is supporting the work of the UN secretary-general and others to broker a just and permanent settlement. Australia’s approach as a member of the UN Security Council reflects this commitment. Australia played a constructive role in the renewal of the mandate for the UN Peacekeeping Force in Cyprus (UNFICYP) in January. Since 1964 Australia has deployed civilian police officers to UNFICYP, making it the longest continual international contributor to the mission.

In relation to FYROM, Australia continues to support and encourage the parties concerned to resolve their differences and to support the mediation process led by UN Special Representative Mr Matthew Nimetz. Australia follows UN practice, using the term “Former Yugoslav Republic of Macedonia,” as a temporary measure, pending resolution between the parties.