Market and product

Australia's Treasurer Josh Frydenberg has urged the U.S. and China to resolve their trade differences, which are clearly starting to weigh on the global economy.

Speaking on the eve of the meeting of G20 finance ministers in Fukuoka, Japan, Frydenberg said Australia's key message to the summit was that free trade creates jobs and leads to higher living standards.

"Obviously trade tensions globally is something that's weighing on the economic outlook and affecting economic investment," Frydenberg told the Nikkei Asian Review in an interview on Friday.

"We would like to see any disputes or differences between the major powers resolved amicably and we'd like to see the multilateral institutions strengthened to deal with the changes," he said.

Acknowledging that Australia benefited significantly from its economic relationship with China, Australia biggest trading partner, Frydenberg said the U.S. had some legitimate concerns about China.

"For Australia it's about having good relationships with both countries, but also about promoting a rules-based global trading system," Frydenberg said.

While he has a formal bilateral meeting scheduled with U.S. Treasury Secretary Steven Mnuchin, Frydenberg said he was still "hoping to catch up" with his Chinese counterpart Liu Kun over the weekend.

"What we say is that the United States does have some legitimate issues," Frydenberg said. "At the same time differences need to be resolved amicably and once that happens, that will be to the benefit of the global economy."

Repeating Australian Prime Minister Scott Morrison's call for "mending, not ending" the multilateral trading system, Frydenberg said that regional free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership were already benefiting the Australian economy and represented a strong argument in favor of free trade.

Tumbling oil prices, rising bond yields and a recent spate of interest rate cuts from central banks around the world, including a 0.25% cut by the Reserve Bank of Australia, should not be a cause for concern about the global economy.

"Let's keep it in perspective," Frydenberg said. "Both the IMF and the OECD have downgraded their economic outlook, but both of them have growth at above 3%."

And with interest rates at record lows, Frydenberg said there was a sense globally that central banks can reduce rates as a means of lowering unemployment without causing inflationary concerns.

"Unemployment is now 5.2% in Australia, but there is a view now that it could come down to something with a four in front of it," Frydenberg said. - Source: Nikkei-