CAIRNS, Australia: Finance chiefs from G20 nations said on Sunday they can overcome geo-political tensions and financial risks to achieve an extra combined 1.8 percent growth under reforms agreed among member nations.
Their two-day meeting in Cairns was focused on developing a suite of policies to reach an ambitious goal of raising the total GDP of the 20 major world economies by two percent above current projections over the next five years.
Finance ministers and central bank governors, including US Federal Reserve Chair Janet Yellen, want to take their plan to the G20 leaders’ summit in Brisbane in November.
In a communique, they said that the 1,000 measures agreed so far—including to accelerate infrastructure investment, financial reform and encourage free trade—could add 1.8 percent to GDP and create millions of new jobs.
But more reforms were needed to meet the two percent goal, agreed in Sydney earlier this year.
“Preliminary analysis by IMF-OECD indicates these measures will lift our collective GDP by an additional 1.8 percent through to 2018,” they said.
“In the lead up to the Brisbane [leaders’] summit, we will continue to identify a series of additional measures to meet our collective growth ambition.
“We will hold each other to account in implementing these policy commitments.”
International Monetary Fund chief Christine Lagarde hailed what she called “significant progress” despite increased geo-political tensions, including in Ukraine and the Middle East, since the ministers last met in February.
“Despite the global recovery continuing, the pace of growth remains low and uneven, in part given increased geopolitical tensions and risks of financial market turmoil,” she said.
“Promoting economic policies that can contribute to a more robust and job-rich recovery is therefore critical at this stage.
“I commend G20 countries for significant progress in developing growth strategies to lift medium-term growth.”
Notes of caution
While welcoming the progress made, US Treasury Secretary Jack Lew said the world economy was facing headwinds, pointing to disappointing growth in Europe and Japan and the slowdown in China.
“In light of these challenges to the global economy, the G20 has stressed the importance of immediate support for creating jobs, growing the economy, and implementing fiscal strategies flexibly to support demand,” he said.
Australian Treasurer Joe Hockey, who was chairing the meeting, also welcomed the progress but warned the G20 against complacency.
“The G20 recognizes that many of the decisions and actions to get the world economy moving are difficult,” he said.
“But we are determined to lift growth, and countries are willing to use all our macroeconomic levers—monetary, fiscal and structural policies—to meet this challenge.”
To help shift from government-led growth towards private sector-led growth, the ministers agreed to establish a global infrastructure hub to share information between countries.
The Global Infrastructure Initiative was meant to increase “quality investment, particularly in infrastructure.”
“Investment is critical to boosting demand and lifting growth,” they said.
Hockey added the hub was to provide a database to help match potential investors with global infrastructure projects.
“We want to create a knowledge platform to build public sector expertise, and develop standardized documentation to reduce the costs of new investment,” he said.
The meeting also saw progress on reforms to the world’s financial system, particularly on how banks apply capital rules, and ways to close tax loopholes that are used by many multinational companies.