Aurelia Butler

Chalmers said the government would look to reach consensus with the opposition parties to amend any laws “if we go down that path”, as he looks set to receive on Friday the findings of the report on the Reserve Bank of Australia (RBA).”If there are some that require a change to the (RBA Act) that we’re keen on progressing, then ideally we would do that in a bipartisan way,” Chalmers told ABC Radio.The independent review, announced by Chalmers in July, will assess how the RBA communicates with the public and weigh the make-up of its board, which consists of two RBA staff, the Treasury secretary and six business people. The review was called after the RBA undershot its inflation target of 2% to 3% for much of the last decade and issued guidance during the COVID-19 pandemic that rates were not expected to rise until at least 2024. But the RBA has made 10 straight rate hikes since May to tame surging inflation.Chalmers said he would release the report with the government’s initial views next month, ahead of the federal budget in May. “So I’d like to put it out in April, and people can go through it and see what they think about it,” he said. A decision whether to re-appoint Governor Philip Lowe, whose term ends in September, would be taken “closer to the middle of the year” in consultation with Prime Minister Anthony Albanese and the cabinet, Chalmers said. More

Revelations this week that China is ramping up its bailout lending to poorer countries serve to highlight a potential debt crisis in the developing world. A new study shows China’s rescue lending surged to $104bn between 2019 and the end of 2021 to participants in its Belt and Road Initiative, the world’s largest-ever transnational infrastructure programme.This figure, while striking, is minor compared to the overall debt levels in emerging markets. The Institute of International Finance, a financial industry association, estimates that total developing world debt rose to a record of $98tn at the end of 2022, after governments and corporations filled their boots in recent years.With so much debt weighing on the world’s weakest economies, it will not take much to push several into default. Pressures are building. A stronger US dollar is increasing the domestic currency valuation of external debts. Higher interest rates, required to fight inflation, are also raising debt service costs. The war in Ukraine is exacerbating uncertainties. Heading off a developing world debt crisis should be a top priority. But as strategic discord between China and the US-led west intensifies, a dearth of co-operation among big creditors is prolonging the agony for several developing world defaulters. A solution to emerging market debt problems is further complicated by the explosion in private sector debt over the past two decades.This explosion has meant that between 2000 and 2021, the share of public and publicly guaranteed external debt of low and lower-middle income countries owed to bondholders jumped from 10 to 50 per cent of the total.The impact of lagging co-ordination is clearly visible. Fitch, a rating agency, says there have been nine sovereign defaulters since 2020, including the unresolved situations in Sri Lanka and Zambia. The competing demands between the multilateral organisations, China, other bilateral creditors and private bondholders are so complex that it now takes three times as long to resolve a default as it did on average in the two decades before 2020, according to Fitch.It is now time for western creditors and China to make concessions and reach a bold new framework. All parties — China, multilateral lenders, other bilateral lenders and the private sector — need to be ready to take losses. A new institutional framework is required. If Beijing feels allergic to the Paris Club of creditors, then the new framework could potentially be constructed around the G20, which is often China’s preferred international forum. Stakeholders should be clear, however, that the objective should not be simply to revive the G20’s debt service suspension initiative, which expired at the end of 2021. The DSSI performed a valuable function in providing relief on debt interest payments for 73 of the world’s low-income countries. What is needed now is more ambitious: an agreed framework for the restructuring of developing world debt.Opposition to such a scheme will no doubt be strong. But failure to grasp the nettle now will only exacerbate eventual losses for all creditors further down the track. Beijing should realise that a framework in which haircuts are spread evenly among creditors is its best hope not only to limit eventual losses but also to preserve its reputation in lower-income countries.Unresolved defaults in the developing world are already making life a misery for people in countries such as Sri Lanka. Many more could suffer unless China and the west find a path to co-operation on what is clearly a moral imperative. More

Switzerland has announced plans to restart diplomatic negotiations with the EU after a two year hiatus that raised doubts over the country’s future economic and political relationship with the bloc. Bern said that it was authorising diplomats to prepare a formal negotiating mandate to reopen talks this summer on a deal that could stabilise trading ties in exchange for concessions on Swiss sovereignty.“There is a positive momentum in the talks between Switzerland and the EU at the technical, diplomatic and political levels,” the government said on Wednesday. Swiss officials are proposing a “package” agreement bundling multiple treaties rather than a universal framework. Efforts to forge a comprehensive “framework agreement” that reworked a series of treaties with Brussels into a single text foundered in May 2021 when Bern abruptly announced it was abandoning the process. The breakthrough came earlier this month after a visit to the Swiss capital by European Commission vice-president Maroš Šefčovič, responsible for relations with Switzerland. He agreed to ditch the overarching format for talks.“We welcome the positive momentum towards modernising EU-Swiss relations,” Balazs Ujvari, a commission spokesman, said on Wednesday. “Our objective remains the same: to upgrade EU-Swiss relations in a way that reflects Switzerland’s deep integration into the EU single market, with a level playing field as its cornerstone.” The 2021 breach set the stage for a “slow motion Swexit”, as individual agreements in areas such as medical regulation, financial equivalence and engineering standards lapsed. The framework negotiations, which had dragged on for seven years, were regarded by many in Bern as an attempt to strong-arm Switzerland into big concessions as the EU sought to consolidate its authority with neighbouring states. In a 2020 referendum, 38 per cent of Swiss voters supported pulling the country out of the passport-free Schengen zone.In Brussels, the negotiations were meanwhile seen as a way of streamlining future EU-Swiss relations and rectifying disproportionate concessions granted to the country as a result of previous piecemeal negotiations. A country of slightly less than 9mn people, Switzerland is the fourth-largest economic partner of the EU, after China, the US and UK, with annual bilateral trade worth €280bn last year. Bern has shrugged off any fallout from the failure of the framework talks. A treaty on the mutual recognition of standards on medical devices has lapsed, as well as EU recognition of instruments traded on Swiss financial exchanges, but most of the 120 individual accords with Brussels are still in place. But Switzerland’s economic resilience may not last. The country is in urgent need of an electricity and power-trading agreement with Europe, economists point out, as highlighted by extreme energy price fluctuations this year, and Swiss universities are clamouring for access to the EU’s Horizon funding programme. Ujvari said a new accord “will help unlock the full potential of our co-operation, including in other areas, such as electricity, health and food safety”.The Federal Council, Switzerland’s executive body, said in a statement that it was hopeful of a mutually beneficial outcome to the “package approach” being taken in the revived round of negotiations. The council said it had made significant progress in winning domestic support for the talks. Last Friday, the country’s 26 cantons agreed a common approach to European policy, greenlighting Bern’s move.

But Switzerland’s largest political party, the rightwing populist SVP, said the government was “taking the people for fools”. The proposed negotiation is “old wine in new bottles” it said on Wednesday, promising to “resolutely oppose” any concessions on Swiss constitutional sovereignty.Bern said it had devised a number of “supplementary” technical policy and legislative measures it could deploy domestically to ameliorate the effects of looser rules demanded by Brussels on wage protection, state aid, immigration and economic subsidies.Šefčovič warned that there were still big differences between the two sides, especially Switzerland’s adherence to single market rules. More