G20 targets $2 trillion addition to global economy in 4 years

17 November 2014

G20 member countries have agreed to attune policies to lift overall investment and increase trade and competition, so as to deliver 2.1 per cent growth, adding more than $2 trillion to the global economy while creating millions of jobs, ensuring inclusive growth and helping to reduce inequality and poverty, by the year 2018.

''Raising global growth to deliver better living standards and quality jobs for people across the world is our highest priority. We welcome stronger growth in some key economies. But the global recovery is slow, uneven and not delivering the jobs needed. The global economy is being held back by a shortfall in demand, while addressing supply constraints is key to lifting potential growth. Risks persist, including in financial markets and from geopolitical tensions. We commit to work in partnership to lift growth, boost economic resilience and strengthen global institutions,'' G20 stated in a communiqué issued at the end of a 3-day summit in Brisbane, Australia.

Members of the Group of 20 industrialised and major emerging economies agreed to implement structural reforms while realigning macroeconomic policies and fiscal strategies to lift growth and private sector activity, recognising that well-functioning markets are necessary for achieving strong, sustainable and balanced growth, and job creation.

G20 said flexible fiscal strategies that take into account near-term economic conditions demand putting debt as a share of GDP on a sustainable path. ''Monetary policies, while supporting recovery, will address deflationary pressures when needed, consistent with the mandates of each monetary authority'' - a policy that perpetrates the easy money policy of the US and most European economies.

However, the communiqué stated, ''We will be mindful of the global impacts of our policies and cooperate to manage spillovers,'' adding, ''We stand ready to use all policy levers to underpin confidence and the recovery.''

Citing risks from financial markets and geopolitical tensions that deter demand and hold back global economic growth, the group submitted close to 1,000 individual policy changes designed to lift growth and said they would hold each other accountable to ensure they are implemented.

''There are some worrying warning signs in the global economy that are threats to us and our growth,'' British Prime Minister David Cameron said after the meeting ended. ''If every country that has come here does the things they said they would in terms of helping to boost growth,'' including trade deals, then growth will continue, he said.

The action plan to bolster growth comes amidst diverging policies that saw US and most other advanced economies completing a phase of monetary expansion while countries around the world follow policy of monetary tightening with simultaneous hikes in interest rates. US is tapering its monetary easing as it boasts the strongest economy among advanced nations, while Europe and Japan add further stimulus to ward off deflation.

The International Monetary Fund last month cut its projection for global economic growth next year to 3.8 per cent.

In the absence of any common policy prescriptions, the G20 spelt out some welcome structural policy commitments by individual countries, such as China's plan to accelerate construction of 4G mobile communications networks, a A$476-million ($417 million) industry skills fund in Australia and 165,000 affordable homes in the UK over four years.

''The G-20 plan to boost global growth is long on ambition but short on specifics,'' Frederic Neumann, co-head of Asian economics at HSBC Holdings Plc in Hong Kong, said in an e-mail. ''What needs to be done to revive global growth is clear: structural reforms. Trade is one such area where more concrete steps could have been laid out.''

IMF managing director Christine Lagarde told the leaders that in order to avoid the ''new mediocre'' of low growth, low inflation, high unemployment and high debt, all tools should be used at all levels.

''That includes not just monetary policy, which is being significantly used, particularly in the euro zone, but also fiscal policy, structural reforms and, under certain conditions, infrastructure,'' she said.

The G-20 also agreed to establish a global infrastructure hub, based in Sydney, with a mandate of four years that would encourage the exchange of information among governments, the private sector, development banks and other international organisations, according to the communique.

To safeguard growth momentum, the US and other G-20 countries presented more than 800 specific projects and policy reforms that include building more roads, improving trade and bringing more women into the workforce.

"We will monitor and hold each other to account for implementing our commitments," the leaders said in the joint statement.

Nobody, however, is expecting 100 per cent implementation of the 800-plus infrastructure projects and policy initiatives will fly because many of them will need to be funded or approved by politicians in their respective countries.

''With the global economy struggling with an uneven recovery, we welcome G-20 leaders' commitment to raising growth and delivering quality jobs,'' World Bank Group president Jim Yong Kim said in a statement. ''G-20 leaders have rightly identified investment in infrastructure as crucial to lifting growth, creating jobs and tackling poverty.''

IMF reform to give emerging economies better representation remains a priority and leaders are ''deeply disappointed'' with delays in implementing changes agreed in 2010, according to the communique.

The G-20 urged the US to ratify the changes, and said if it does not happen by the end of the year it would ask the IMF to provide other options, according to the communique.

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