Reforms to Strengthen World Financial Structures

Meetings held in Washington today have provided the impetus for important reforms to strengthen world financial structures in the wake of the financial crisis in East Asia.

The Treasurer, the Hon Peter Costello, MP, today welcomed decisions by Finance Ministers representing 22 Nations to map out a course of action designed to avert as far as possible similar crises in the future.

The meeting was organised as a special meeting of Finance Ministers and Central Bank Governors from 22 major economies in association with the regular six monthly meetings of the Interim and Development Committees of the International Monetary Fund (IMF) and the World Bank.

The special meeting was convened by the United States in response to a proposal made at the APEC Economic Leaders meeting in Vancouver in November, 1997.

Mr Costello said the discussions had identified a number of ways in which the architecture of the international monetary system and the operations of international financial institutions could be improved in the light of the Asian crisis.

These included measures to strengthen international and domestic financial systems, improve the surveillance activities and crisis management role of the IMF, as well as providing greater disclosure of key economic data to the IMF and to the public.

The meeting of the 22 major economies agreed to the establishment of three working groups to consider further action to increase transparency and disclosure, strengthen financial systems and market structures and provide appropriate burden sharing between the official and private sectors in times of crisis.

Disclosure of fiscal and monetary information will be recommended, along lines aleady adopted in Australia.

“Our Charter of Budget Honesty legislation provides leading edge disclosure of fiscal information of the kind which will be recommended to other countries. The Reserve Bank of Australia is one of the few central banks which publishes net foreign exchange reserves on a monthly basis – another measure which is likely to be recommended,” Mr Costello said.

“Regulatory reform of the financial system, being introduced by the Government following the Wallis Committee Report, is another area where Australia is leading the world. This will further improve Australia’s already strong financial system.”

The outlook for the world economy was cautiously optimistic. Despite the crisis in East Asia, the IMF is still expecting Australia to have one of the highest growth rates in the developed world in 1998-9.

In commenting on regional developments, Mr Costello emphasised the importance for resolving the crisis of achieving economic stability in Indonesia and pressing ahead aggressively with financial sector reform in Japan.

WASHINGTON

APRIL 16