Trade retreat the biggest global economic risk: Scott Morrison

The biggest risk facing the world economy is nations retreating from global engagement, Scott Morrison says.

Treasurer Scott Morrison speaks at the Lowy Institute in Sydney yesterday.

The biggest risk facing the world economy is major nations retreating from global engagement, Scott Morrison says, as the World Trade Organisation warns that the trend in world trade is the weakest in 30 years.

The Treasurer says the debate in the US presidential election is worrying, as is the rise of protectionist sentiment in other major nations.

“The biggest risk globally is a retreat from a global economy, and particularly large advanced economies withdrawing,” Mr Morrison said, following a speech to the Lowy Institute yesterday that underlined the threat of populist opposition to trade, foreign investment and migration.

“We’ve got both the (presidential) candidates in the US talking about withdrawing back and we’ve seen similar sentiments in other places.”

Mr Morrison, who is travelling next week to the IMF’s meeting in Washington, said the weakness in global trade and the rising populist sentiment had been discussed at the recent G20 meetings in China.

“Australia has a vested interest for standing up and arguing the case,” he said. “The importance of immigration (and) foreign investment in driving what we’ve been able to achieve — the results are there to see.”

Mr Morrison said the other big risk facing the world was financial stability. Although progress since the global financial crisis had been encouraging, with the British referendum to leave the EU being managed without significant disruption, he said the banking sector was also vulnerable to populist attack.

“There are populist sentiments in (the call for) the royal commission on banks.

“The ­reason we survived the global fin­ancial crisis is the strength of the financial system, and the strength of the regulators behind them.

“The banks are stronger in those terms than they have ever been, but that can’t be taken for granted.

“One of the great concerns I have about what others are proposing in a royal commission is it would bring to a halt so much of the positive work that is being done in both the regulatory side of our financial system and what is being done within the financial system itself by the banks and other agencies to increase the ­resilience of the Australian ­economy.”

The WTO estimates trade volume growth will rise by only 1.7 per cent this year, which will be slower than global growth overall.

Apart from the GFC, the last time this occurred was in 2000, while the trend over the past three decades has been for trade growth to be 50 per cent faster than global economic growth.

The downturn is severe in Asia, traditionally the dynamo of world trade, with its exports expected to rise by only 0.3 per cent this year, while its imports will rise 1.6 per cent.

“The dramatic slowing of trade growth is serious and should serve as a wake-up call,” WTO director-general Roberto Azevedo said.

“It is particularly concerning in the context of growing anti-globalisation sentiment.”