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Finance minister of the year 2011: Swan confounds his domestic sceptics

by Eric Ellis

Australia has struck it rich, and lucky, as it has used its natural resources to benefit from the China spending boom. But the careful stewardship of its treasurer, Wayne Swan, has played a key role in making it the best-performing economy among the world’s richer, developed nations. Not that he is likely to get much credit at home, as Eric Ellis reports.



 

Australian treasurer, Wayne Swan 

Finance minister of the year 2011 Wayne Swan

Press release

How Euromoney’s finance minister award became an Aussie political football

Finance minister of the year Wayne Swan
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BLESSED WITH, AND industriously exploiting, a natural resources bounty pointed at China that would embarrass Croesus, some Australians will find it strange that Euromoney has chosen their treasurer, Wayne Swan, as finance minister of the year.

The less charitable might even recall the words of Donald Horne, in his 1964 book The Lucky Country, which read: "Australia is a lucky country, run by second-rate people who share its luck."

Swan would probably be among the first to admit that he has indeed had some luck. But his work as treasurer is acknowledged by Euromoney as much for what didn’t happen to Australia on his careful four-year watch – economic Armageddon in the trail of the 2007-08 subprime meltdown, which he confronted in his first year in office – as for what he positively did, positioning Australia to power through the new crisis looming from abroad.

"The fiscal rules that we put in place to deal with the global recession when we moved to stimulate the economy were ahead of the rest of the world," says Swan, in an interview from the kookaburra-chorused back verandah at his home in Brisbane.

"These were the sorts of rules that were ultimately adopted by the G20 in its summits through 2009, this whole notion that you needed an exit strategy. At the time we moved to stimulate, we put one in place and we’ve been applying it vigorously. It’s not happening anywhere else in the world."

As a result, Australia is one of only three OECD economies not to fall into recession since 2008, alongside Poland and South Korea. And it seems well placed to repeat the feat as the worsening euro crisis and US funk spread their infection. After two decades of growth, Australia’s sustained expansion has been the most impressive performance of any member of the developed rich countries club.

That’s all very well, but is Swan a worthy recipient of the award, in this era of booming Brics and roaring Tigers emerging to trump the sputtering west?

Former ANZ chief economist Saul Eslake of the University of Melbourne think-tank The Grattan Institute knows the 57-year-old Swan well, and offers a qualified yes.

"Swan is certainly after glory," says Eslake, "but for his party, not for himself. He’ll be thinking how this gong will improve Labor’s chances of winning the next election, seeing it in intensely political terms as will, of course, his political opponents."

That political capital might be useful, given that there’s every possibility that by the next time Euromoney considers the global field of finance ministers, Swan won’t be among them. The longevity of the minority Labor-led government of prime minister Julia Gillard – Swan is deputy prime minister – depends on the whim of three independent MPs who face a voter backlash in their own constituencies, because they backed Labor into power last year.

And none have been impressed by Hookergate, allegations that Labor backbencher Craig Thomson, who chaired a key parliamentary economics committee, paid for prostitutes with his union’s credit card, as Labor bailed him out of bankruptcy with party funds. With a two-seat majority and a 15-point deficit in opinion polls, Labor can’t waste a single seat, lest it trigger an early election it will certainly lose.

What does Swan think?

"Oh, I think Australians recognize that we did really well during the global financial crisis and the global recession," he says.

"Australians do understand that we were almost alone among the developed economies to not go into recession. That’s the thing I’m most proud of.

"When we moved to stimulate the economy (in 2007-08), given the nature of the debate in Australia, it was controversial and vehemently opposed by our political opponents. As time has proven, the fact is we did keep Australia out of recession, we had one quarter of negative growth and avoided it in the subsequent three. We took a well-thought-out, well-executed set of plans to stimulate the economy.

"And it worked, so we didn’t go into recession and we didn’t suffer the capital destruction and the skill destruction that we saw in many other countries, and it’s given us a really great foundation to approach the Asian century and the resources boom that comes with it, because we are going into that from a position of strength."

If only Australians saw it that way. Through their gloomy prism, things are grim, and they’re pointing fingers at the government. Indeed, during this 20th anniversary of the collapse of the Soviet Union, there’s something of Gorbachev about Swan and Labor – hailed abroad by everyone from the IMF to the OECD but loathed at home. Or perhaps it’s a little like what sport-obsessed Australians are world renowned for. They hate it when the referee intervenes in an epic battle. Sport is best contested when the umpire is invisible, which usually means he’s doing a good job. But Australian umpires, like their politicians, aren’t to be praised, no matter how well run the contest. Elections elsewhere are fought on the economy, and Australians are the thankless lot who bounced the conservative Howard-Costello team from office after 11 years, while the booming economy was at the peak of its powers.

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Finance minister of the year 2014:
Mexico's Luis Videgaray


Full details of the award, including an in-depth interview with Videgaray and coverage of the reception at the IMF in Washington will be live October 10.