TONY JONES: Good evening. Welcome to this special edition of Q&A from the Seymour Centre at Sydney University. I'm Tony Jones. Please welcome tonight's special guest, the managing director of the International Monetary Fund, Christine Lagarde. Thank you. Madame Lagarde is a pioneer. She was the first woman to lead an international law firm, then the first female Trade Minister of France. Now as head of the IMF, Christine Lagarde is shaking up the global economy with her emphasis on environmental issues, economic equality and gender inclusion. Our audience of students, academics and citizens will have the chance to question Madame Lagarde on her vision for the IMF, the global economy and Australia's role in both. To fit into her busy schedule, Q&A is pre-recorded, but we're being simulcast on ABC News 24 and News Radio across Australia. Our Twitter stream is live and we are keen to include your comments on the screen, so please join the Twitter conversation by using the #qanda hash tag as usual. Christine Lagarde is here in Australia to meet with economic leaders at this weekend's G20 meeting. But tonight she'll answer your questions. Our first question is from Emma Malherbe.

G20 GROWTH AGENDA

EMMA MALHERBE: The Australian Treasurer who is co-chairing this week's series of G20 meetings wants to drive a strong agenda on growth, but there's deeply diverging views between the emerging and developing and developed countries on how this can be achieved. So what is required to achieve this growth, and how can the G20 countries this week achieve a mutual platform to actually work together and achieve this?

TONY JONES: Christine Lagarde, the floor is yours.

CHRISTINE LAGARDE: Thank you for your question. Maybe two words about the G20 and the IMF. The G20 is going to bring together leaders from the economic and financial world, essentially ministers but also governors of central banks, and all together they represent about 80% of global GDP. So what they do together actually matters when they go back home and decide on their domestic policies, which is why it's important that they all come together to discuss issues that will be relevant back at home when they return from Sydney. The IMF is a club of about 188 countries whose mission is stability in the world in order to induce prosperity, and we are in three lines of business. We do surveillance for countries, we do technical assistance, and lending whenever a country is in trouble. So the Australian agenda of the G20 is precisely growth and also infrastructure. The beauty of this agenda is, number one, that it's simple and that it is relevant for all members of the G20, of which there are some advanced economies - most of them - and a lot of the big emerging market economies such as China, India, Russia, Brazil and South Africa. And for all of them, all members of the G20, growth is essential. It's essential to deal with employment to create jobs. It's essential to bring about stability, and it is something they can do well at home, but they will do even better if they cooperate all together.

TONY JONES: Can I break in for a moment? The IMF's global growth prediction is 3.75% for the coming year.

CHRISTINE LAGARDE: Yep.

TONY JONES: Does the IMF agree with the Treasurer Joe Hockey, the Australian Treasurer? He has a push for a higher growth target, a hard growth target for this G20 meeting. Is that a good idea?

CHRISTINE LAGARDE: It is a good idea. The forecast we have is on the basis of the current situation without major changes, and it is 3.7% for this year, 4% next year. There is a potential for doing better and for doing more if only countries were to take some actions. So the Australian Presidency has asked us to look into the policies that could be decided by each of those G20 governments in order to improve the growth situation and, you know, if the right policies were decided, in all these countries, there could be improved growth going forward, which means more jobs and better prosperity.

TONY JONES: Let's go to our next question from Mike Callaghan from the Lowy Institute.

TAPERING & TURMOIL

MIKE CALLAGHAN: A question about emerging markets.

TONY JONES: We'll just wait for the microphone to get to you there, Mike. OK.

MIKE CALLAGHAN: A question about emerging market volatility and the US Federal Reserve - quite a topical issue. Now, in the IMF's global financial stability report that was released last October, there was a warning there that misjudgments by the US Federal Reserve over the pace of its tapering of quantitative easing could see world interest rates rise significantly in a fair degree of global financial market turmoil. Now, this is a concern of the emerging markets, that the US Federal Reserve doesn't take into account the impact of its actions on them. In the report that the IMF prepared for this week's G20, there is a reference there's scope for much better cooperation between central banks in handling its exit from such policies. What sort of better cooperation do you envisage?

CHRISTINE LAGARDE: Well, thank you, Mike, for reading the report that we just released. It's high on the agenda. We believe that, as much as tapering is necessary... Tapering means essentially doing less quantitative easing... OK, that's a bit complicated too. So, essentially being less interventionist for the central banks.

TONY JONES: There is another way of looking at it, isn't there? The US has basically been printing money, effectively, by buying its own bonds to a huge degree every month. Now they're lowering that.

CHRISTINE LAGARDE: Yeah, that's one way to put it, but what I want to avoid is that you assume it is like this building up and development of a big bubble of liquidity, which is not exactly the case. It's swapping bonds for liquidity. So it's not as if it was inflating so much. Tapering is reducing the volume of bonds that are purchased by the Federal Central Bank of the United States, and it is being done in a different manner by the ECB, the Bank of England and certainly the Bank of Japan. Tapering has had an effect on the markets, and just the hint of tapering had an effect back in May. So what we were saying in the report is, as much as it is necessary, there has to be good communication, so the central banks have to announce what they want to do, when they're going to do it, by how much they're going to reduce, over what period of time, depending upon which criteria. And two, there has to be enough cooperation between central bankers so that they are mindful of what the consequences will be, not just at home where they do the tapering, but elsewhere in the world where we have seen some volatility, which is hardly avoidable given the fact that we are in very uncharted monetary policy and it has effects on the market.

TONY JONES: So that volatility is about capital flowing from the emerging economies, that is the developing economies, back to the United States as the recovery happens.

CHRISTINE LAGARDE: Yes.

TONY JONES: That's dangerous, isn't it, for those economies, for the emerging economies?

CHRISTINE LAGARDE: There has been a huge... Not a huge. There has been a lot of capital outflow from the United States and various advanced economies to the emerging market economies in the last couple of years because there were better returns in those emerging market economies. Now that the Fed essentially is engineering a rise in the long-term interest rates of some of the US bonds, that capital that had gone out to the emerging market economies to get good return is partly flowing back to the United States to get those good returns in a stable environment. There has been some of that, not in huge quantities, but enough to bring about some volatility. And what we are saying, we at the IMF, is mind the shop at home. In other words, emerging market economies, you need to look after your various equilibriums, you need to look at the fiscal policy, you need to look at your monetary policy. You need to have the house in order to resist the volatility that can be induced from the tapering of the US Fed in particular at the moment, but we are also saying to the US authorities, particularly the Fed, 'Be mindful of what's happening elsewhere when you do what you have announced...'

TONY JONES: 'Don't go too fast. It could be dangerous for these economies.'

CHRISTINE LAGARDE: 'Don't go too fast and explain what you are doing.'

TONY JONES: Yeah. That leads us to our next question, which is from Michael Go.

EMERGING ECONOMY RISK

MICHAEL GO: Madame Lagarde, thank you. The question I have, and following on from Mike's question, we live in a word of interconnected economies, we live in a world with multi-developed economies and they are growing at various rates and different rates, particularly in this region of the world with emerging and the developed markets. My question is, based on what happened in Greece, Italy, Spain, et cetera, we are looking at a growth in China, for example, that is outstripping everyone else globally. And as you know, the old saying, 'If China sneezes, the world will catch a cold.' So my question would be, is there enough defensive economic measures and strategies being undertaken and in place to protect ourselves from that with 20/20 hindsight?

CHRISTINE LAGARDE: I think, Michael, what you are doing is asking the question of what happens if China has a hard landing or soft landing, and are there ways to defend against that. I would say, first of all, it is very unlikely China would have a hard landing. If I look at the forecast we have for China, it is 7.5% growth. It's certainly a bit less than what they have done over the last ten years, but an economy of that size and with that degree of development is bound to slow down a little bit, and we believe that it's appropriate, actually, that they should slow down their growth. And second, even if there was such a thing, which we believe it will not happen, clearly countries that are partners with that big economy should edge and make sure they have trade relationship, financial relationship, foreign direct investment relationship with other countries of the world in order to just, you know, edge and protect their position.

TONY JONES: Can I follow up on that? Because one of the lessons we learnt in this part of the world back in the late 1990s was when big European banks pulled their capital out of Asia, that can cause really serious problems. We had the Asian Financial Crisis grew out of that. So I suppose a follow up question to that is, is there a strategy in place? Will the IMF consider, will the G20 countries, the powerful ones, consider offering lines of credit to emerging economies if they get into trouble in this period?

CHRISTINE LAGARDE: That's exactly the business that the IMF is in. Every crisis has a silver lining, and in a way, the financial crisis that we have just gone through since 2008 has helped us redesign some of the financial instruments that we had available for the members. We put in place what we call the flexible credit line, for instance, that has been used recently by countries like Mexico, Columbia and Poland. We have precautionary and liquidity lines that did not exist in the past either that can be used in a way as an insurance policy against the crisis and particularly being a bystander of the crisis happening elsewhere. So, yes, we do have instruments to help countries in that situation.

TONY JONES: In other words, you try to stop an Asian Financial Crisis developing, for example, out of the emerging markets crisis with all this capital flowing back to America?

CHRISTINE LAGARDE: We would have the instruments, and I think that to the extent that more is needed, different approaches are needed, we have to be flexible, we have to adjust, we have to respond to the membership needs.

TONY JONES: Very good. Our next question is from Ted Wziontek.

ABBOTT DEBT AND DEFICIT

TED WZIONTEK: Prime Minister Tony Abbott recently stated at the World Economic Forum in Davos that you shouldn't address debt and deficit with more debt and deficit, and adding that cutting back government spending... advocating cutting back on government spending with the private sector to carry the capital investment. The IMF, I believe, has criticised him saying that this doesn't address economic growth or employment. Could such policies on their own undermine growth, and is there a place for some government spending to enhance growth and employment?

CHRISTINE LAGARDE: I think you're asking two questions here. One is fiscal consolidation, that some people call austerity - is that compatible with growth? And what we are asking in the sort of country-by-country analysis that we do is identify the situation in which the country is. The situation that has a heavy debt, that is running a high deficit and that is under financing pressure because it cannot obtain financing from the markets at decent terms is in a situation where it has to do fiscal consolidation. We see no alternative to that. On the other hand, a country that is not under such pressure should indeed focus on growth and a fiscal consolidation path that is sensible, that is anchored in the medium term, that indicates where it's going, at which speed, at which pace, but doesn't have to do the fiscal consolidation the hard way, if you will, so that growth is compatible with a decent fiscal path going forward. Now, the second question you ask is, is there room for public spending in relation to growth creation and job creations? And to that, I would say there is a role for government to be involved, and possibly for public spending as well, but it's going to be a question, again, of a country-by-country analysis. Where I say that the government has to be involved, it has to procure the environment in which private sector investors are going to feel comfortable investing and putting their money. And that's a government's job, to make sure that the policies are known and there is no uncertainty, that things are predictable, and are not stuffed with corruption and all those things that are a brake on investment. And second, there are areas where there must be public spending, such as, for instance, very large infrastructure projects, for instance, where the return on investment is going to be years and years away. In those kinds of projects, there is certainly space for public money to be invested, sometimes in partnership with the private sector and all those PPP arrangements, for instance. But I don't want to pass a general judgment of what is right, what is wrong. It is going to be country-specific and it is going to be project-specific, in a way. But I have no doubt in my mind that on some infrastructure projects, public investment, public money is actually helpful and needed.

TONY JONES: Just briefly, do you perceive a difference in philosophy between yourself and Treasurer Joe Hockey of Australia who talks about the age of entitlement being over? And, of course, what he's talking about there is the overspending, as he sees it, in the big European economies on social welfare, education and so on.

CHRISTINE LAGARDE: Well, I know it's tempting to oppose one against the other. I really don't want to go in that direction because I believe the G20 and what we at the IMF do has to do with dialogue, comparing notes, exchange of information, best practices and so on and so forth, and we have to continue doing that. But investment in health, education, is absolutely necessary. And I hope we can talk at some stage about the role of inequality and how it impacts on growth. Clearly, investing in health, investing in education, making sure that there are equal opportunities for all is something where public money is needed. It's not a question of... What did you call it? Vested rights? No, entitlements.

TONY JONES: Entitlements. Yes. 'The age of entitlements is over,' is Joe Hockey's phrase.

CHRISTINE LAGARDE: I'd respond by investing in health and education is a priority.

TONY JONES: Thank you very much. Our next question is from Rana Baleh.

GREECE & IMF

RANA BALEH: The fiscal austerity measures implemented in Greece to alleviate the effects of the Global Financial Crisis ultimately had a damaging effect on both the Greece and European economy. How will the IMF modify its policies to ensure such economic miscalculations won't happen again?

CHRISTINE LAGARDE: Thank you, Rana. I have looked at Greece from different angles because when the Greek issues started and we had to put a program together, I was Finance Minister for France and then I morphed into being Managing Director of the International Monetary Fund and the Greek program continued throughout. So the real initial miscalculations were the ones that led to the wrong numbers, certainly the wrong approach to the financial situation through which Greece was going, and the fact that the country was running debt and running deficit largely... in numbers that were largely in excess of what had been represented, let's put it that way. When you have a situation like that, you need to deal with it. And the way to deal with it was certainly to restore a bit of sanity in the public finance and to make sure that the numbers were disclosed properly, that everything was documented, to make sure that, at some stage, the Greek economy could return to financing itself and to standing on its own merits and its own strength, rather than be on life support, so that was the whole purpose of the various programs that were put in place between the European partners of Greece and the IMF with Greece. Now, it has been a long journey, we can only celebrate now the fact Greece is finally coming out with a primary surplus, as we call it, which hasn't happened since 1943, from my recollection. So as much as there has been miscalculation, misquotation of numbers, clearly a path has been taken, which has been hard on the Greek populations, and where we have done everything we could to make sure that the burden would be fairly born by all and not just by the employees and the civil servants, we have made sure there was enough of a safety net so that people who were most exposed would not suffer too much. But still, it has been a very difficult process through which the country went and through which the Greek people, you know, made huge sacrifices.

TONY JONES: Well, you wanted a chance to talk about global equity. Here it is. We'll go to the next question. It's from Adie Dawes-Birch from the Global Foundation.

INEQUALITY & MULTILATERALISM

ADIE DAWES-BIRCH: You recently quoted Martin Luther King in your outline of this new era of multilateralism. And in essence, what affects one affects us all in some way. Pope Francis has also recently had a different perspective on a similar theme in stating we have collectively created this globalisation of indifference, and that really concerns me. I guess what I'm asking is, how optimistic you are that the IMF and the G20 can work together to actually address the issue of global inequality?

CHRISTINE LAGARDE: Well, as I said in the beginning, our mission is financial stability in the world in order to procure prosperity. So globalisation of indifference is not our mission, is not our objective. Quite to the contrary. What we aspire to is globalisation of opportunities, globalisation of prosperity, globalisation of inclusion, if you will. And inequality is certainly in the way of all that. I'm not taking here an ideological view because it's not the role of the IMF. But we are just looking at the economics. We are looking at growth potential. And it's really pretty obvious that rising inequality as we see it at the moment, in both advanced economies, in emerging market economies and in low-income countries, this rising inequality is not conducive to sustainable growth. Now, there is a huge debate out there, and the economists in the room will not contradict me on that, as to whether or not redistribution can actually fix that, and particularly redistribution through taxation. So I'm not going to take a stand on that. But what I will say again is that in response to that risk, that rising inequality actually conflict with growth, there has to be. And that's why I felt so strongly about it. There has to be investment in health and there has to be investment in education, because in most countries, particularly the low-income countries, particularly the emerging market economies, if those investments do not happen, then there will not be opportunities for all to actually reach their potential, participate in growth, participate in the job market. So in response to that risk of rising inequality, the least that should be done, that must be done - and we advocate that in surveillance work and the program design that we do with countries when it is needed - is proper investment in health and education, because we don't want global indifference.

TONY JONES: Now, just a quick follow-up there. You've made the point in your Dimbleby Lecture recently that global income inequality is actually dangerous. What is the danger that you fear from income inequality?

CHRISTINE LAGARDE: What I mean by that is, you just look at numbers, and I'm not going to quote IMF numbers, I'm going to quote some of the Oxfam report numbers, the Oxfam report that was released recently. When you see that 85% of the wealthiest individuals in the world have wealth and income which equals that of half of the world population, there is something that is wrong, OK. In the sense that the inequality is so obvious and so strong, so wide...

TONY JONES: We are talking about 85 individuals?

CHRISTINE LAGARDE: 85 individuals owning as much wealth as half the world. Of course, the half that is less privileged, the 3 billion people who have the least, OK. So when you see those numbers, it's pretty striking that inequality is an issue and is not one that is actually conducive to growth. That's what I meant.

TONY JONES: Let's move on. Our next question is from Cassandra Goldie. She is from the Australian Council of Social Services.

G20 NOT INCLUSIVE

CASSANDRA GOLDIE: Madame Lagarde, a very warm welcome to you. We are the national voice against poverty and inequality in Australia, so we are delighted with the leadership that you are demonstrating on this front. I'm also part of the C20 for this Australian Presidency and last year I was in Russia where there was a strong commitment to inclusive growth, and yet we know over the next couple of days there is going to be some very important discussions, one of which is with the B20, with business leaders talking specifically about infrastructure, and as the chair of the civil society voice on infrastructure, I want to ask you, should civil society be equally at the table in these kinds of discussions? When we have a room full of a particular profile of wealthy, elite, mostly male perspectives that get brought into the room when we know that this is a shared interest for us, when we know women and children make up 70% of the people's poorest in the world, we need to have a more inclusive dialogue. What's your suggestion about the best way for us to achieve that so we can have faith that these are good decisions that are being made over some very important issues at this time?

CHRISTINE LAGARDE: I'd say, 'Don't give up and keep at it.' And I'll tell you why I say that. Back in 2008, the G20 was rejuvenated in a way, because that was a rather sleepy forum of finance ministers and governors of central banks, and that was it. You know, we were going about our business, but not really breaking through anything in particular. And it was elevated to the leaders' level, and the G20 suddenly caught the attention of the world, and they took some really good decision in order to limit the crisis and take some good decisions. At the time, it was just the G20, and then a year later, it was G20 plus B20, so it was not just the government of the 20 largest countries in the world... economies in the world, it was also the business leaders of those 20 countries. Then a year later, it became the G20, the government, the B20, the business leaders, and then the unions of the 20. So it is sort of an evolving group that's gradually including more and more, which is why I'm saying don't give up, keep at it. Second, at the IMF, we do a lot of reaching out to civil society, and every time we have the Spring meeting, the annual meeting, we bring all the civil society representatives together so they can give us their feedback, their views and we take that into account. The same is true whenever we go into a country, whenever we design a program, we reach out to civil societies because we believe that the voices of civil society have to be not only listened to, but also we have to pay attention and we have to eventually modify and take the right measures in response to that.

TONY JONES: Alright. There's a lot of voices in this room. You are watching a special Q&A with the Managing Director of the IMF, Christine Lagarde. Our next question comes from Tina Zhou.

INTERNATIONAL TAX DODGERS

TINA ZHOU: Hi, Madame Lagarde. Thanks for taking the question. Recently, former Australian Treasurer Wayne Swan called for Australia as the chair of the G20 2014 to set an action agenda to aggressively target rampant tax evasion by large multinational corporations. He stated that there are multinational companies that aren't paying tax at all or avoiding tax in domestic jurisdictions and domestic taxpayers are missing out. The Australian Government also recently named Google and Apple as companies it believes are using complex tax structures to shift their profits to lower tax countries. With two-thirds of the world's trade being controlled by large multinationals, what future role can and will the IMF play to tackle the issue, especially its effect on global equality and the redistribution of wealth? Thank you.

CHRISTINE LAGARDE: That's a big ongoing problem and process. And it's really one where the IMF is helping as much as it can. It's not our core business to give tax advice and redesign the international tax treaties that form this little web around the global economic activity, but it is a matter we are helping the OECD with, and we will bring all the knowledge we have, particularly of the not-so-advanced economies that are often the victims of those very smart tax planning schemes that help companies not to violate the law, not to be in breach, but to be smart about how they design the legal and fiscal structure in order to limit or, as they say, 'optimise' their taxation.

TONY JONES: In fact, they are shifting their profits to tax havens where often they pay no tax at all.

CHRISTINE LAGARDE: Or very little tax.

TONY JONES: Is that immoral?

CHRISTINE LAGARDE: You know, what they will say to that. They will say they are not especially concerned about your question, they are concerned about being within the law and not breaching the law. So what it says is...

TONY JONES: Time to change the law, is it? I guess that's the question. Yeah.

CHRISTINE LAGARDE: Governments have to look at how they should change the law and how they should do it cooperatively. That's another reason why those countries have to do it together, they have to talk to each other, compare notes, because if they don't, they are going to compete against each other, and that's the race to the bottom which is not going to be in the interests of the countries because they will lose revenues, which will not be in the interests of the normal taxpayers because they will be required to fill in the gap that is left by those that can manage to play those games. But, Tina, in response to your question, because you named a couple of companies, it is a fact that the business is evolving, and whereas it's pretty easy to tax a base that is tangible, that is identifiable, where you are manufacturing activity, products and so on and so forth, it's a lot more complicated to do that when the products are intangible, when they move around by flow of information, where the localisation of the headquarters or the service centre is uncertain, so the governments and the international tax treaty designers and drafters have to take that into account and they have to invent new concepts just as quickly and as well as those companies are inventing their optimisation schemes.

TONY JONES: Just out of interest, has any economist looked at how many billions of dollars being lost to the national revenue of countries where people are spending their money for Apple and Google and companies like that? How much is being lost?

CHRISTINE LAGARDE: There are conflicting numbers but all of them are big.

TONY JONES: Let's move on to our next question. It's from Geoffrey Walton.

CLIMATE CHANGE & CARBON TAX

GEOFFREY WALTON: Yes, thank you. Thank you, Madame Lagarde. I wonder, could you comment on what seems to be emerging as global best practice in relation to carbon reduction policy? As you know, I think the Australian Government seems intent on abolishing the carbon tax, citing high cost of business, and, for that matter, consumers. But can we really afford such a policy reversal if we want to grow into a carbon-reduced world?

CHRISTINE LAGARDE: You know, there are different approaches to the issue, and the issue is there and needs to be addressed and needs to be tackled both on a domestic basis and on an international basis. But my personal firm belief is that we cannot wait until an international body or an international agreement is actually found or reached to actually address the issue, because it's critical. Now, there are multiple ways to look at it. You can either address it by way of taxation, or you can address it by way of incentives that are given or paid to those whose behaviour you want to influence and change, and in between there is a range of things that can be qualified, modified, identified or mixed together. But it's pretty much along those lines. So I was really pleased to see that the Government is maintaining its objective, and clearly we will be interested in seeing what the proposals are. Let me tell you from which angle we look at it. We believe that environmental degradation - and I'm using that term on purpose because it cannot be limited to CO2 emission, it cannot be limited to carbon, it's environmental degradation - is something economics will call an external cost to transactions, to the economies. And that externality has a price. For the moment, it's not well priced. It's hardly priced at all. So what we are saying is...

TONY JONES: Except in Australia, where it's quite a high price. That would be the point of the Abbott Government.

CHRISTINE LAGARDE: Well... That's being cute. Let's look at it from an economic angle. Externality has a cost. Externality must have a price, and once that price is identified and determined, then it has to be dealt with, either by way of incentives or by way of taxation or by way of cap and trades, or by way of auctions. There are multiple ways to deal with it, but it has to be dealt with.

TONY JONES: We've got plenty of other questions, but I want to follow up on that because you urged Prime Minister Abbott not to abandon Australia's role as a pioneer in climate change, and in the climate change debate. I'm just wondering, do you fear that might happen?

CHRISTINE LAGARDE: Well, I certainly hope it doesn't.

TONY JONES: We will move on. I think that's a diplomatic answer. Our next question is from Elizabeth Broderick, Australia's Sex Discrimination Commissioner.

WOMEN AND QUOTAS

ELIZABETH BRODERICK: Madame Lagarde, I've been so delighted to see that the IMF, under your leadership, has had a really strong focus on women, particularly lifting women's workforce participation around the world, but also you've taken the message that investing in women is actually smart economics. Human rights always starts at home, so I suppose I'd be interested to know... Within the IMF, I know you have set targets, but just how you are progressing against those targets, particularly in relation to women's leadership. And some of the strategies you have in your country programs, which I know have been effective, what lessons can we learn here in Australia, the Australian Government but also the business community and the Australian community generally?

CHRISTINE LAGARDE: Thank you very much for your question, and thank you very much for everything you do in that same area that you just touched on. On the quota issue, I've said that before, but I will say it again. I was not in favour of quotas when I was a young woman. That was many moons ago. Faced with the harsh reality of working in a big international law firm, I certainly changed my mind and I do believe that quotas, targets, whatever you want to call them, are a necessity. And if anything was to prove it, the fact that, for instance, in Europe, under European directives, there is now a quota of women sitting on the board of companies, and it's a rolling quota that increases over time, and it has changed the landscape clearly, and I know it will continue to do so. So at the IMF, we do have quotas. The difficulty of those quotas is they are very granular. We don't say, 'We want 50-50,' or, 'We want 45-55,' whatever. We go down to, 'OK, overall, leadership, special expertise, non-economists,' and so on and so forth. We have set quotas, we have reached the quotas, we have re-set quotas that are higher and more difficult to reach. We're not there yet, and clearly it's... I mean, the further you go... Two points. The more granular you are and the further you move into that quota definition and improvement of the situation, the more difficult it is, but we are going to keep at it and we are going to be just open and honest about it. When we miss, we are going to reschedule, we're going to put more effort into it in order to reach our objective. Second thing, I'm very proud to say I have now started some empirical work and some publication as well about the role of women in the economy. We have recently published a paper on women, growth and the economy in which we clearly state the role that women can play, how much they can contribute, and how quite a few countries are actually losing huge opportunities by not giving access, by maintaining cultural, societal, and sometimes economic and sometimes tax obstacles to women joining the workforce. So we're trying to be as analytical as we can. We are trying to be loyal to our mission, but we are also trying to be open to a new range of ideas, perspectives in order to make sure there is more inclusion. And I believe that inclusion also is about making sure women have access to the job market and are given fair and equal opportunities.

TONY JONES: Is the biggest obstacle the intransigence of powerful men?

CHRISTINE LAGARDE: I don't want to look at it that way.

TONY JONES: Elizabeth Broderick says yes to that.

CHRISTINE LAGARDE: What Elizabeth is doing, and it is being done in other countries as well, like Japan, is making sure men and powerful men, like you, for instance, are on board and take ownership of the project. Because I believe that it's not something that will be a woman's business, a woman's affair, but it's going to be a human affair, and to have both men and women endorsing the project of these equal opportunities, of this fair access, of looking at the constraints in a very practical way to get things done is exactly the right way to go. And enlisting the support of those... How do you call them? The man champion of change. And the same thing is happening in Japan. I hope it goes from here to other places as well to make sure that powerful men actually endorse the project.

TONY JONES: Thank you. Our next question is from Richard Yetsenga.

CHINA MODEL

RICHARD YETSENGA: Hi, Madame Lagarde. You referred to the economists in the room earlier. I'm one of those. I wanted to ask about China, but I guess a little bit more cultural. I lived in Hong Kong and worked in Hong Kong for quite a long time. I was born in South-East Asia so I've looked at many countries, and I don't think there is another economy I have looked at where the divergences between perspective is so stark. I mean, China has had the largest of poverty reduction in history, and yet so many analysts are so consistently downbeat on its sustainability and China's potential to continue growing the way it's been growing. What factors do you think account for this sort of divergence or differences of your dichotomy, if you like?

CHRISTINE LAGARDE: We at the IMF try to look at numbers. We try to be as factual... We are not number-crunchers, but we are trying to really stick to the empirical understanding of the situation, and we believe that the Chinese economy is very cautious with its development and is often poorly understood and poorly interpreted. So we are trying to adjust that by being very factual, very empirical, and as analytical as we can.

TONY JONES: Can I just jump in there? How do you get numbers in a non-transparent economy run by a one-party State?

CHRISTINE LAGARDE: Well, this is a matter that we have to address in a number of countries. It's not China-specific, but I'm going to say we try to access numbers through different sources. So we not only trust the official sources, we also counter those official numbers by factual observations, by alternative sources of information. The reason we do a lot of reaching out to civil society, the reason we talk to unions, the reason we talk to the business leaders as well, is to make sure that we have a consistent, and if it's not consistent, then we go back and double-check and challenge numbers. That's the way we deal with that. If we understand or are under the impression that the numbers are cooked, then we challenge and occasionally we take action.

TONY JONES: There's another question on China. It's from Yifen Axford over here on the left.

CHINA SHADOW BANKING

YIFEN AXFORD: Thank you. The rest of the Chinese shadow banking system are currently considered a financial threat to global economic assistant. In your opinion, what are the signs that would confirm this threat, and what role is the IMF taking in prevention and ultimately to deal with any negative consequences?

TONY JONES: So China's shadow banking system.

CHRISTINE LAGARDE: I would first observe it is not only, again, a China-specific issue. There are other countries in the world that are developing a shadow banking system, which is clearly a threat if it is not supervised, if it is not regulated and if it prospers without boundaries. I'm not ruling out shadow banking in general. What I'm saying is that it can be beneficial in some cases, provided that it is well supervised, that it is kept in check and that's what we are recommending in countries like, for instance, China. In other words, keep it within those boundaries, make sure it is supervised and that it is not exposing the countries to uncontrollable and unmitigatable risks.

TONY JONES: Let's move on while we've still got time to do it. We've got another question. It's from Paul Ronalds, CEO of Save The Children Australia.

HEALTH AND EDUCATION

PAUL RONALDS: Madame Lagarde, you have already spoken very eloquently about the importance of investing in health and education systems. Yet around the world, we see too little investment in building such systems. For example, Save The Children research estimates that each year, one million children die on their first day of life. What is the IMF's role in encouraging particularly developing countries to develop more robust education and health systems so that all citizens can enjoy the benefits of economic prosperity?

CHRISTINE LAGARDE: I'm going to refer to a study that was conducted over a period of ten years on the low-income countries. There was a comparative between those countries that have been under program with the IMF and countries that were not under program with the IMF. There are two findings from that study. One is those countries that were under program have had a better and higher growth rate than the others, and more importantly, to me at least, those countries under program with the IMF had higher investment in both health and education. So when we help countries design the program of improving the economic situation, making sure they have a sound sustainable path, we try to insist on investing in health and education, and the numbers and that study actually prove it.

TONY JONES: We've got time for a few more questions. Let's go to Scott Limbrick.

IMF VOTING SYSTEM

SCOTT LIMBRICK: Thank you. Through a recent speech at the Lowy Institute and in a joint opinion piece in the Wall Street Journal with Singapore's Deputy Prime Minister, Australia's Treasurer Joe Hockey has expressed a strong interest in pursuing reform of the IMF's voting system to shift voting shares to better represent the increasing economic weight of emerging and developing countries. Given the reluctance of the US Congress to go forward with ratifying these reforms, what can the IMF do itself to better increase its legitimacy in the eyes of these stake holders?

CHRISTINE LAGARDE: Well, there are two things. One is we must keep at it and we must continue to insist that the governance reform that was decided in 2010, right in the middle of the financial crisis, be actually completed, ratified by all key shareholders of the institution, and the United States is one where ratification is needed and where I very much, very strongly hope, that both the executive and the legislative branches will get together and will decide to move on with the ratification of something that was decided in 2010. Second, you asked the question of the legitimacy of the institution. I think the legitimacy is based both on the representativeness of the membership and how they express their voice, how much quota they have in the institution, but it's also based on the representativeness of the staff. And we have staff from all over the world, educated in multiple universities all over the world, to actually contribute their brain power, their skills, their expertise, their goodwill in order to pursue that mission that I mentioned earlier, which is better financial stability for prosperity in the world. And second, we have to be - that's something I am very keen on - we have to be even-handed. We cannot be prejudiced against one particular set of countries or one particular region. We have to be even-handed. And it's under those three conditions - the representativeness in terms of voices and quota, the representativeness of staff, and the even-handedness of the work that we do that we shall be respected as an independent institution serving the entire membership without discrimination.

TONY JONES: We've got a philosophical question this time about what development needs, and it's from Philippa Barr.

REDEFINE GDP

PHILIPPA BARR: Ciao. International institutions like the IMF, UN and World Bank as well as some governments are developing the idea of natural capital accounting to value resources like land, water, and even air quality as financial assets. Will the IMF ever abandon the use of the Gross Domestic Product in favour of natural capital accounting to measure the long-term viability of a national economy?

CHRISTINE LAGARDE: When I was discussing earlier with you the issue of valuing and pricing externalities, I was exactly on the same page, Philippa. And I think, if you are asking me, I think we will continue to use GDP for a long period of time because it's an accounting system that has been used, that is recognised, that is hardly challenged by all players. But it is not sufficient and it is not enough because it does not account for externalities. It does not account for the value of some cultural goods. It does not account for the damage that we do to the environment, which is why I believe, personally, that while continuing to use that GDP system, which is sort of consensual, which has been tested and used and which we need in essence at the moment amongst all players, in addition to that, we need to combine alternative systems that take into account those externalities, those not-accounted-for goods that have no tradeable values and yet that have a very significant value.

TONY JONES: Let's hear from someone else who is talking about changing the way we look at things, and it's Rachel Botsman.

NEW MONEY TECHNOLOGIES

RACHEL BOTSMAN: Madame Lagarde, my question is about the future of money. I'm interested... All around the world, we're seeing new examples emerging that could represent one of the most radical reconfigurations of banking and the concept of money that we have seen in centuries. The collapse of trust in traditional banking systems combined with new technologies is giving rise to everything from virtual currencies such as Bitcoin to mobile banking in Africa, to crowd funding platforms like Kickstarter to peer-to-peer lending platforms, all of which in some way cut out the traditional financial middle man. So my question for you is, do you think these innovations will disrupt the financial system at a large scale, and, if so, is this disruption a good thing, not for the banks, but for the average person on the street?

CHRISTINE LAGARDE: You know what, just judging by the applause, it sounds really attractive, really alternative, and, hey, why not? But I'm concerned about one thing. And that is that, for the moment, those systems are also very nice channels to do some very unfortunate money laundering, tax evasion, and I think to have alternative monetary systems in place is only acceptable provided that there is enough scrutiny, enough transparency, enough governance so that those key obstacles are avoided. If it was not the case, then I think it would be a very suspicious and very inopportune way of substituting a system that is not perfect, but that is at least governed and regulated. Not a perfect system, for sure. So that's my take for the moment on the various alternative, including the virtual, systems that are in place. But, you know, I'm not discounting them. I'm not suggesting that should be off the map. I'm saying there are some really serious pitfalls that have to be looked after.

TONY JONES: I'm sure Rachel would like to debate the point. I'm sorry we don't have time to do that. We've only got a few questions left that we can go to. The next one is from Matt Shim.

AUSTRALIA AND FOREIGN AID

MATT SHIM: Hi, Madame Lagarde. On Tuesday morning, the Abbott Government officially removed poverty alleviation as a priority from Australia's foreign policy on top of cutting the foreign aid budget last year by $4.5 billion. Do you condone this action by the Government, especially considering Australia's standing as a developed economy, and one which many see as having a duty to provide aid and alleviate poverty in the world?

CHRISTINE LAGARDE: I believe as Managing Director of the IMF that eliminating poverty is the goal by not only the World Bank but also the United Nations is a very, very legitimate and laudable goal, and one that certainly we will help develop and implement in the future.

TONY JONES: I take it you are not going to specifically comment on the Australian question.

CHRISTINE LAGARDE: You're quite right, Tony.

TONY JONES: We do have time for one last question. It comes from Maia Alfonzetti.

ADVICE FOR A TEENAGE GIRL

MAIA ALFONZETTI: As a young girl interested in studying economics and law, I'm aware that this profession will require a lot of time and hard work. Do you have any professional regrets and would you say that one must make great family sacrifices in order to reach the top?

CHRISTINE LAGARDE: Well, a few things. One is I very strongly believe that girls' education is an absolute must. Second, I don't know of any situation, position where there is no hard work, no requirement to study, and where things are just easy-peasy and you don't have to make any effort. Third, I believe that society, including communities, but also families, should actually do everything they can to help girls, young girls, women, to carry out some of the duties that we have, genetically and otherwise, and to make those compatible with professional life, with access to the job market and so on and so forth, if it is the desire of those girls, young girls and women. And fourth, from my personal experience, you don't necessarily succeed on all fronts at the same time. So you should try to be yourself, do your best, and have as much confidence as you can in what you do, and not hesitate to call for help from other women, from other men, from family members, from husband, companion, however, because it's a joint operation. It's not flying solo.

TONY JONES: Just quickly picking up on one last point from that. We are just about out of time, but there was a question in there that you didn't address, and that is, do you have any professional regrets?

CHRISTINE LAGARDE: Do you want me to sing, 'No, no regrets?'

TONY JONES: If you could do it in French just for a change... I'm afraid that's all we have time for tonight. Please thank our very special guest Christine Lagarde. Thank you. Thank you. And a particular thanks to the Global Foundation who helped facilitate today's Q&A and to Sydney University and everyone here at the Seymour Centre. You can now give yourselves a round of applause. Thank you very much. And you can join us next Monday on Q&A with the Assistant Minister for Infrastructure and Development, Jamie Briggs, the Shadow Minister for Infrastructure, Anthony Albanese, mining magnate and newly elected member for Fairfax, Clive Palmer, the President of the Australian Council of Trade Unions, Ged Kearney, and the head of the US Army's Wellbeing Project, Brigadier General Rhonda Cornum. Until next Monday, goodnight.