Australian Treasurer Seeks Orderly Withdrawal
From U.S. Dollar
By John Garnaut
-- -- TREASURER Peter Costello has called on East Asia's central
bankers to "telegraph" their intentions to diversify out of
American investments and ensure an orderly adjustment.
Central banks in China, Japan, Taiwan, South Korea and Hong Kong
have channelled immense foreign reserves into American
government bonds, helping to prop up the US dollar and hold down
American interest rates.
Mr Costello said "the strategy had changed" and Chinese central
bankers were now looking for alternative investments.
"Of course you can have an orderly adjustment," he told
reporters. "And what I would recommend is that these matters be
telegraphed well in advance. I think we should begin preparing
ourselves for it."
Mr Costello said the "re-emergence" of China as the world's
greatest economy "is not something to be feared".
Asked if a muscular China would be a force for good, however, Mr
Costello said it would be good for growth and stability. "With
the growing economic strength you will see growing influence in
diplomacy in the regional architecture, as you would expect.
"I am sure it will be a force for economic development and I am
sure that in partnership with other global powers, China wants
to see a stable East Asian region."
Earlier, in a speech to open the Australian National
University's East Asian Bureau of Economic Research, Mr Costello
said Australia's involvement in the region was broader than
"It is a key ingredient of who we are as a people," he said.
"While Australia has its own unique culture, we are also a
people who confidently enjoy the cultures of Asia, with seven of
our top 10 overseas travel destinations being in the region."
Ahead of next month's G20 meeting in Melbourne, Mr Costello
called on regional leaders to reform their anachronistic
He said underdeveloped financial markets were to blame for the
emerging economies of East Asia sending 94 per cent of outward
portfolio investment to "ageing" countries outside the region.
He said the region needed to improve poor macroeconomic
frameworks, inadequate regulatory systems, uncompetitive markets
and insufficient investment in health and education
Copyright © 2006. The Sydney Morning Herald.
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