Australian treasurer warns world must be weaned off QE ‘morphine’

Last updated: February 18, 2014 7:39 pm

Australian treasurer warns world must be weaned off QE ‘morphine’

By Jamie Smyth in Sydney

Australia’s finance chief has hit out at the US, Europe and emerging market economies, calling for the latter to wean themselves off the “morphine” of easy money and embrace reform, days before he is due to host his global peers at this weekend’s G20 talks.

Proving egalitarian in his criticism, Joe Hockey, the Australian treasurer, also took a swipe at the US Congress for blocking budget increases and reforms to the International Monetary Fund, and warned Europe against trying to sideline the G20 as the world’s premier troubleshooter.

“Sooner or later the world has to get off this morphine of printing money and easing monetary policy,” he told the Financial Times on Tuesday.

“The US Fed has a responsibility to act in the best interests of the US. My strong view is that there is no systemic problem across the developing world that is being caused by tapering.”

Speaking ahead of this weekend’s meeting of G20 finance ministers and central bank governors, Mr Hockey said he would not lecture emerging nations at the talks but noted that some countries had their own “domestic issues”.

His comments follow criticisms from the likes ofRaghuram Rajan, India’s central bank governor, who has accused the US and other industrialised countries of running selfish economic policies that cause turmoil in markets as the US Federal Reserve tapers off quantitative easing programme.

The risk that the G20 talks descend into finger wagging between developed and developing countries is one that Mr Hockey will need to overcome at a time of growing scepticism, particularly in Europe, about the G20’s relevance as the financial crisis abates and global growth picks up.

Mr Hockey warns against taking a “Eurocentric” view on the G20.

“Europe is more removed from what is happening in Asia than any other part of the world,” he said. “How can you ignore the emergence of billions of people with a middle class that will be much larger than Europe?”

Canberra is a staunch support of the G20, which gives it a seat at the top table with world powers for the first time.

Mr Hockey has emerged as the ideological backbone ofTony Abbott’s Liberal-National coalition in Australia, which was elected in September.

The 48-year-old rails against wasteful public spending and subsidies for businesses. His slogan of “an end to the age of entitlement” urges individuals and business to become self reliant, he says.

“I believe in freedom, enterprise and liberty – they are the things that facilitate opportunity,” he said. “I think our role as finance ministers is to facilitate ambition and lift the yoke of regulation, red tape, taxation and centralised control.”

Canberra will use its G20 chairmanship to push for the removal of red tape and regulations that are impeding business.

“I have a unique goal to try to drive the world to greater growth and prosperity,” added Mr Hockey, who says his political idol is Teddy Roosevelt, the US president who became known as the “trust buster” for breaking up monopolies.

But Mr Hockey has his detractors. Trade unions have attacked him for overseeing the end of a century of carmaking in Australia, following the decision by Toyota to close its plant in 2017. They say that failing to provide extra public subsidies threatens 40,000 jobs in car parts supply industries.