Australian Treasurer Joe Hockey has expressed doubts the world has seen the last of the US debt impasse as he urged the United States to get its house in order and signalled a renewed focus on opening more markets in Asia as a response to ongoing instability.
In an interview with Fairfax Media, Mr Hockey said the government was prepared for more volatility in financial markets, despite US Congress on Thursday finally passing legislation allowing the debt ceiling to be raised, thereby averting a default on US debt that could have sent the global financial system into a tailspin.
”This is a matter that’s going to take a long time to resolve,” Mr Hockey said. ”Essentially, they are just kicking the can further down the road.”
The US deal only lasts until February and Mr Hockey said there had been a breakdown in relations between Congress and the White House that wasn’t easily fixed in the short term.
”There’s a great polarisation in US politics between the parties,” he said.
Mr Hockey was impressed how Americans, at least those not directly affected by the government shutdown, continued to go about their business during the crisis. He felt the results of a default would be so calamitous that a deal had to be done.
But Australian officials were preparing for the consequences of any default all week, knowing only that any response would have to have been largely improvised due to the unprecedented nature of such action.
The last time the US defaulted on any debt was in 1790, when the new nation declined to pay for a period the debts accrued by its newly federated states while they were independent.
Mr Hockey said the government would concentrate on the medium-term objectives of reducing the budget deficit and lowering debt.
Breaking into new markets in Asia would be a priority as the government pushed hard to settle free trade agreements with China, Japan and South Korea, he said.
In a thinly veiled swipe at the rancorous debate in Washington, Mr Hockey said the US had to be vigilant other countries did not move out from its orbit.
”Washington is like being in a home where mum and dad are constantly fighting. The danger is, if it goes on, a time will come when the kids will look for another home, they’ll look at moving into the home across the road.”
Australia has its own debt ceiling issue it must resolve. The ceiling has to be lifted above $300 billion this year.
Unlike the US, there will be no partisan stand-off when a bill is brought to Parliament. Labor will support the changes, a spokesman for Labor’s Treasury spokesman Chris Bowen said.
On the US debt default debate, Mr Bowen said: ”The global economic and financial consequences of a US default would have been severe.
”We welcome the US Congress reaching a deal to stop this occurring.
”Work needs to occur to ensure the US and global economies aren’t put in this situation again.”Source: Sydney Morning Herald – Hockey looks to Asia as the US stutters
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