R 092155Z MAR 09
FM AMCONSUL MELBOURNE
TO SECSTATE WASHDC 4902
INFO AMEMBASSY CANBERRA 
AMEMBASSY LONDON 
AMCONSUL PERTH 
AMCONSUL SYDNEY 
WHITE HOUSE WASHINGTON DC
USEU BRUSSELS
DEPT OF TREASURY WASHDC

C O N F I D E N T I A L MELBOURNE 000037 
 
 
NOFORN 
SIPDIS 
 
DEPARTMENT FOR EEB, EAP, EAP/EP AND EAP/ANP 
WHITE HOUSE FOR NEC 
TREASURY FOR SOBEL AND WINSHIP 
 
E.O. 12958: DECL: 03/10/2019 
TAGS: EFIN ECON AS
SUBJECT: COSTELLO AND OTHERS ON NEXT STEPS FOR 
US/AUSTRALIAN RELATIONS 
 
REF: CANBERRA 203 
 
Classified By: Michael E. Thurston for reason 1.4 (b) 
 
Summary 
------- 
 
¶1. (C/NF) Consul General hosted former Treasurer Peter 
Costello and other prominent Victorians at the first of a 
series of focus group lunches on the future of 
U.S./Australian relations.  Participants agreed that the 
United States' credentials as a center for world finance had 
been damaged and that increased regulation would help. 
April's G-20 meeting will be a watershed event and 
participants expressed concern that unless solid progress is 
made, European pressure to hold more exclusive G-7 summits 
may win the day, cutting out other significant economies. 
Other steps the new administration can take to improve ties 
include sharing lessons learned in the global slowdown, 
revisiting the U.S./Australian FTA and invigorating people 
and culture swaps.  Participants agreed that Australian 
motivation to improve ties with the United States has rarely 
been stronger, and "the time to act is now."  End Summary. 
 
Damaged Financial Credibility? 
------------------------------ 
 
¶2. (C/NF) During a March 4 luncheon with several prominent 
Victorians, participants observed that the global financial 
crisis has damaged the United States' credibility as a center 
for global finance.  Peter Costello, Liberal Party MP, and 
John Roskam, Executive Director of the Institute for Public 
Affairs (a right-leaning think tank) said that stepped up 
prudential regulation in the United States would help restore 
some of this lost credibility.  Costello, who served as 
Australia's Treasurer for more than 11 years during the 
previous Howard administration, suggested Australia could 
offer the United States guidance on implementing stricter 
prudential and financial regulations. 
 
¶3. (C/NF) Costello commented that Australia has been somewhat 
insulated from the global downturn due to its decision not to 
relax credit standards, to prohibit its four major banks from 
merging, and to create the Australian Prudential Regulation 
Authority (APRA), which he described as a regulator to watch 
all financial institutions.  (Comment: Many business leaders 
in Melbourne would disagree with Costello's statement and 
believe that the full force of the coming "economic tsunami" 
has not yet fully hit Australia.  End comment.)  Costello 
added that exchanges of regulators and legislators might 
benefit both countries. 
 
G-20, FTA and Beyond 
-------------------- 
 
¶4. (C/NF) Costello, who took credit for being one of the 
architects of the G-20, noted that the Bush administration's 
decision to use the organization to confront the global 
financial crisis helped to cement it as a premier 
organization.  William Fisher, Director of the Victoria 
office of the Department of Foreign Affairs and Trade (DFAT) 
and former Australian Ambassador to Canada and France, said 
however that the future of the G-20 is not assured. 
According to Fisher, some Australians are worried that 
European pressure to confront the global slowdown via a 
smaller, G-7 configuration may derail the G-20's current 
momentum.  Fisher flagged his concern over the number of 
disparate proposals submitted for the April G-20 meeting that 
will not be able to be successfully harmonized during the 
short time in London.  Fisher and Costello both agreed that 
in order to institutionalize the G-20, a follow up meeting in 
Korea or Japan should be announced at the conclusion of the 
London summit. 
 
¶5. (C/NF) Turning to the U.S./Australian free trade agreement 
(FTA), Costello argued for amending the accord to facilitate 
the free movement of people between the two countries as a 
logical next step.  Nick Economou, Professor of Politics at 
Monash University, agreed with Costello, observing that 
recognition of professional qualifications across borders 
would encourage deeper ties between the United States and 
Australia.  John Roskam said many Australians see the FTA as 
a fait accompli, but finding new ways to expand it would only 
require a small amount of political capital on either side. 
Bill Fisher noted senior American officials such as Rich 
Armitage and Robert Zoellick who had been strong supporters 
and champions of Australia had served the bilateral alliance 
well.  He expressed hope that individual relationships with 
senior officials in the current administration would continue 
to deepen. 
 
Australian Troops to Afghanistan? 
--------------------------------- 
 
¶6. (C/NF) On the question of whether Australia would agree to 
a request by the United States to send additional Australian 
troops to Afghanistan, participants were split.  Costello, 
Roskam and Economou responded Australia likely would say yes. 
 William Fisher, however, added the caveat that Australia 
would not respond favorably unless NATO increased its 
commitment to Afghanistan. 
 
U.S. and Asian Regional Architecture 
------------------------------------ 
 
¶7. (C/NF) Participants agreed that the United States should 
play a greater role in Asia Pacific, including in regional 
architecture, but differed on which forum provided the best 
opportunity.  Alluding to Secretary Clinton's February 18 
remarks in Jakarta on greater U.S. engagement with Asia, 
including plans to pursue accession to the ASEAN Treaty of 
Amity and Cooperation, William Fisher urged the U.S. should 
next consider participation in the East Asia Summit (EAS). 
According to Fisher, APEC is not a sufficient forum most 
because it does not include a security dimension.  Taiwan's 
presence in APEC, Fisher said, precludes that organization 
from developing the comprehensive scope that some Asian 
leaders (including the Rudd government) are seeking. 
Alluding to PM Rudd's vision for an Asia-Pacific Community 
(APC) by 2020, he insisted that a "new architecture" was 
necessary and that senior level (read: head of government) 
participation would be required. 
 
¶8. (C/NF) Peter Costello disagreed with Fisher's conclusion 
that a new architecture is necessary.  According to Costello, 
Asia Pacific countries should focus on making the numerous 
existing agreements work better, rather than adding another 
organization to the "tangle" of pacific architectures.  John 
Roskam noted that Australia needs the United States to be 
engaged in the Asia Pacific not as a strategic counterbalance 
to China, but rather because the United States is a 
democratic and free-market economy with a legacy of 
involvement in the region. 
 
People and Culture Swaps 
------------------------ 
 
¶9. (C/NF) All four participants agreed that the 
U.S./Australian relationship would benefit by encouraging 
more Australians to visit the United States.  William Fisher 
praised the "working holiday" program which allows Australian 
students to spend an extended period of time in the United 
States, but lamented over the "cumbersome" DHS requirements. 
He said that many Australian students are opting to go to 
Europe instead of the United States because of DHS 
requirements of being a "student" and being "sponsored." 
Nick Economou added that a combination of prohibitively high 
college tuitions and the United States' many commonalities 
with Australia also make it a less desirable destination for 
a growing number of his students. 
 
Comment 
------- 
 
¶10. (C/NF) The starting point for most of our official 
conversations with our Australian counterparts almost always 
revolves around how sound U.S./Australian relations continue 
to be.  We were struck this time, however, by how keen these 
prominent interlocutors were to continue to build upon that 
base.  All four participants noted that the time to make real 
strides in the U.S./Australian alliance is now because 
"Aussies are in love with Obama" and Prime Minister Rudd is 
"keen" to show his willingness to work closely with the 
President. 
 
 
THURSTON