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Firm goal imperative: G-20 finance leaders

Growth through structural reforms is both ambitious and possibly unpopular.

G-20 finance ministers and central bank governors during an official group photo session in Sydney on Saturday. — AFP

The world’s top economies may agree to set an ambitious target for faster global growth at a weekend meeting in Sydney, where major central banks are also being urged to coordinate policies to avoid “surprises” that could further roil emerging markets.

Opening the two-day meeting of the Group of 20 finance ministers and central bankers on Saturday, Australian Treasurer Joe Hockey said support was building for setting a firm goal for growth.

“I have a great sense of hope that this G-20 meeting will be able to lay down a real and tangible framework for an increase in the growth of the global economy over the next five years,” said Hockey, who is hosting the Sydney gathering.

If adopted, the plan would be a departure for the G-20, as previous attempts to set fiscal and current account targets have faltered.

And while Canada’s central bank chief Stephen Poloz called the goal “aspirational” and doubts remain about its implementation, it would give the group fresh focus and mark a sea change from recent meetings where the debate was all about growth versus budget austerity.

France’s finance minister, Pierre Moscovici, welcomed a goal of lifting world growth by a total of 2.5 percentage points over five years, calling it ambitious but “not unrealistic”.

A G-20 source said Germany had dropped its opposition to setting an overall target, as long as there were no goals imposed for individual states. However, not all the German camp seemed to be happy, with Jens Weidmann, head of the country’s central bank, calling quantitative targets “problematic”.

And Nhlanhla Nene, South Africa’s Deputy Finance Minister, said the target would be meaningless unless issues faced by emerging economies such as inequality, high unemployment, and volatile global financial conditions were addressed. The plan borrows wholesale from an International Monetary Fund paper prepared for the Sydney meeting which estimated that structural reforms would raise world growth by about 0.5 percentage point per year over the next five years, boosting global output by $2.25 trillion.

The laundry list of reforms run the usual gamut of liberalising product and labour markets, lowering barriers to trade, attracting more women into the workforce and boosting investment in infrastructure.