Treasurer Wayne Swan believes the challenges facing the world economy are the most severe since the global financial crisis (GFC), and there is concern over the capacity of European and US political institutions to deliver the needed response.
Mr Swan used a ministerial statement marking three years since the Australian government moved to protect the economy when faced with the first GFC to set out priorities for when G20 finance ministers meet in Paris this Friday and Saturday.
The gathering is the final preparation for the G20 Leaders meeting to be held in Cannes in November.
"My clear message will be that both individual and collective action is needed to address global financial market volatility and put the global economic recovery back on track," Mr Swan told parliament on Wednesday.
"Developed countries - in particular in Europe - need to put their budgets on a sustainable footing, while supporting growth where possible. Europe needs to regain the confidence of markets in its capacity to meet its debt obligations."
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
The United States must also do more to support its faltering recovery, while putting its budget on a sustainable path in the medium term, he said.
"More broadly, all countries need to undertake reforms that will both lift and rebalance global growth. With hundreds of millions unemployed globally, it is vital that this work has at its centre the creation of jobs," he said.
He again called for more flexible exchange rates in developing nations, a position he argued on his recent visit to southern China, as well as at recent International Monetary Fund and G20 meetings in Washington.
"Despite our fundamental strengths, we know that the Australian economy and our budget will not remain untouched from global instability," he said.
He said the domestic fallout from these global events was most evident in the share market and had unsettled both consumers and business.
Still, the IMF in its annual report on Australia released Friday confirmed Australia's strong fundamentals and its successful response to the GFC, which meant it is better placed to deal with global instability, he noted.
Responding to the statement, opposition treasury spokesman Joe Hockey said the treasurer was preparing the ground for failing to deliver a budget surplus next year as promised.
"That's what the ministerial statement is about," Mr Hockey told parliament.
"We're not affected, but we are affected."
But he said the time for excuses had come to an end.
He also felt that not enough was being done by the G20 and others to properly identify the derivative risk that is flowing through to other financial institutions around the world from the sovereign debt crisis in Europe.
"That was, of course, the unidentified, poorly explained and rather dramatic impact of the original financial crisis in the United States and Europe in 2008."
He said the secondary flow-through of laid-off risk could be tens, perhaps hundreds, of billions of dollars of sovereign debt exposure.
