Finance ministers from G20 nations meet in Cairns this weekend as they grapple with how to achieve a lift in global growth by two percent while being held back by a sickly eurozone recovery. Strengthening global growth, creating jobs and how to achieve this is the Group of 20's top priority under Australia's rotating presidency, along with making the world economy more resilient to future shocks.
At a meeting in Sydney in February, finance ministers and central bank governors from the world's biggest economies vowed to shift away from austerity and boost their collective gross domestic product by more than US $2.0 trillion over the next five years. To meet the goal they pledged to work on reforms to accelerate infrastructure investment, lift employment and enhance trade - but there are fears some countries are no longer fully committed, with many at different stages of the economic cycle.
The OECD this week cut its growth forecasts for most major advanced economies, with the global economy dragged by a sluggish eurozone, tension in Ukraine and the Middle East, and uncertainty over Scotland's future. Australian Treasurer Joe Hockey, who will chair the Cairns meeting, admitted reaching the goal could be challenging.
"Whatever the progress on our two percent growth ambition reported in Cairns, we have to do better," he said recently as ministers prepare the groundwork for November's leaders' summit in Brisbane. "If anything, the world outlook has become a bit more uncertain since February, so we have to redouble our efforts to 'shift the dial' on growth. "It's an ambitious goal, we recognise that," he added. "But without the combination of agreed ambition and mutual pressure, very little will ever be achieved."
The International Monetary Fund called on the G20 to take clear steps to spur growth. "Decisive action is needed by all members for stronger and more balanced growth," the Fund said Wednesday in a note to the G20 ahead of the meeting. The IMF flagged a possible failure of the targets in late July, warning the plan could be wiped out by rising interest rates and weakening emerging economies.
US Fed chief Janet Yellen is due in Cairns after a policy meeting Wednesday that saw the central bank stick to its timetable for raising interest rates from mid-2015, with its asset purchasing programme ending in October. But while Washington grapples with when to tighten monetary policy, the Bank of Japan and European Central Bank are considering further easing steps as their economies falter. Analysts say China, meanwhile, will likely embark on a series of fresh stimulus measures after its central bank reportedly injected US $81 billion into the country's top lenders Tuesday to bolster growth following a string of weak data. Mike Callaghan, director of the G20 Studies Centre at the Lowy Institute in Sydney, said the two percent target needed to be kept in perspective.
"To get the extra growth requires 'extra', politically difficult reforms," he told AFP. "I would see it as all rhetoric if the G20 self-proclaimed that they had all announced the extra policies to lift global growth. "I would see it as realistic, if the assessment was that 'we are heading in the right direction, but there is still a way to go and implementation is the challenge'."
In an effort to stimulate growth in ways other than the ultra-easy monetary policies implemented after the financial crisis, the meeting will look to build on work to boost private investment, particularly infrastructure. It will also focus on bolstering reforms in competition and deregulation and policies to increase jobs, an increasingly urgent proposition.
Last week, the World Bank warned of "a global jobs crisis" that was hurting the chances of reigniting growth, with an extra 600 million positions needed world-wide by 2030 just to cope with the expanding population. G20 leaders have called for each member to develop growth strategies and employment action plans ahead of the summit. Callaghan said a key outcome from Cairns should be progress on a common reporting standard to stop multinational companies from shifting profits to avoid tax, with the OECD putting forward proposals this week.
He also expects movement on financial regulation and rules to reduce the problem of "too-big-to-fail" banks. Business leaders have made clear they want to see progress towards slashing red tape with free trade - including the free flow of goods, services, labour and capital - acting as a driver of growth. Anti-corruption measures and reforming global institutions are also set to be discussed.