According to the AFR, at the G20 Joe Hockey has:
…clinched agreement from the world’s most powerful economies to boost global growth by at least 2 per cent over the next five years.
Mr Hockey said the G20 was focused on developing concrete action to improve global growth prospects, and has committed to implement policies that aim to lift collective GDP by more than 2 per cent above the current trajectory over the next five years.
“Realistically, these policies could mean an extra US$2 trillion in global economic activity and tens of millions of additional jobs,” Mr Hockey said in a statement issued on the final day of the summit.
Commitments from Group of 20 finance ministers and central bank governors to tackle structural reforms will form the basis of the hard target.
As the first step to achieving this target, Mr Hockey said each country will deliver a comprehensive growth strategy as part of the Brisbane Leaders Summit in November.
“There is no room for complacency. Each country will play a significant part in achieving our common target,” Mr Hockey said.
Here is what the Communique actually said:
Addressing these challenges requires ambition. We commit to developing new measures, in the context of maintaining fiscal sustainability and financial sector stability, to significantly raise global growth. We will develop ambitious but realistic policies with the aim to lift our collective GDP by more than 2 per cent above the trajectory implied by current policies over the coming 5 years.
Despite the cheer leading of the AFR, Joe Hockey’s policy of seeking hard and measurable outcomes has been watered down to an aspiration, the very outcome he sort to avoid. That’s not to say it’s useless. It could apply a little moral suasion to member states. And if nothing else, it will be a benchmark for their probable failure as national interests take precedence.
It is also good to see the Libs working through multilateral forums. I’m not sure if Messrs Abbott and Hockey are naive or determined, either way, multilateral diplomacy is a positive shift from the Howard era’s politicised bilateralism. It is helping to deepen the G20 as some kind of go-to forum in the event of crisis, which is no bad thing in offering an alternative to the IMF, and brings Australia into a powerful tent. Who knows? They may be able to establish new normatives for cooperation around more prosiac economics.
The full Communique illustrates the difficulty of achieving much in more ordinary times with a long list of contradictory aspirations: liberalising infrastructure investment while regulating banks; fixing stretched fiscal balances while supporting growth; tightening monetary policy and being mindful of cross-border consequences but retaining flexible exchange rates; sustaining price stability in a context of inflation and deflation; reforming control of the IMF but leaving it in US hands; ending “too-big-to-fail”; making shadow banking and derivatives safer but reinforcing global financial integration while paying due respect to home country regimes.
It is, in other words, something for everyone and nothing for anyone, except those going long prolix hypocrisy. Davos Man delivered handsomely on that basis:
Gary Cohn, chief operating officer at Goldman Sachs, warned on Friday that in trying to make banks safer, global regulators risked spreading new dangers throughout the financial system.
By forcing banks to build up larger capital buffers to absorb losses and hold more liquid assets, regulators were sending borrowers to other, less capitalised ‘‘shadow banks…If we continue to live in a world where safety and soundness and unflappability of banks trumps everything else, trumps economic growth, and trumps liquidity, you are going to continue to see shadow banks grow bigger and bigger until of course maybe shadow banks become the next problem, or until liquidity becomes the next crisis,” Mr Cohn said.
It’s quite an act rolling out this argument amid a G20 riven by the results of unrestrained capital flows, hot money and leveraged carry trades. But hey, nice work if you get it, especially when Uncle Sam stands behind you:
[US Treasury Secretary Jack] Lew’s suggestion that emerging economies that are overwhelmed by financial market turmoil could go to the IMF is unlikely to help. Emerging economies feel they were treated harshly by the IMF in the late 1990s crises in comparison to the kid glove treatment given to European Union countries in the more recent crisis.
…South Korea’s Deputy Prime Minister and Minister of Strategy and Finance, Hyun Oh Seok, suggested the Fed and other major central banks could at least strive to avoid surprises in their policy.
Emerging economies such as Turkey, Brazil Indonesia, South Africa, Argentina, and India have had to raise interest rates sharply to slow capital and currency runs sparked by the Fed’s ‘taper’ of its $US85 billion a month bond buying program.
“QE tapering should be undertaken in a very orderly manner and carefully calibrated given the global economy today is very much interconnected,” Hyun told Reuters. QE stands for “quantitative easing” or central bank bonds buying.
The Fed should seek a consensus among its international counterparts on “what is the optimum level of withdrawal that the world economy can manage”, India’s Economic Affairs Secretary Arvind Mayaram told reporters in Sydney.
The conflict de jour is obviously unresolved.
On the fiscal side, Bank of England governor, Mark Carney, made more sense, in defiance of his host:
Bank of England governor Mark Carney has signalled that G20 policymakers are pushing ahead with plans to force the world’s “too-big-to-fail” banks to call on bondholders rather than governments to bail them out during financial crises.
Under the new rules, 29 banks that are judged systemically important on a global basis will be forced to issue bail-inable bonds, which will convert to equity should a bank get into financial difficulty.
Global giants such as HSBC, JPMorgan Chase, Citigroup, Barclays, BNP Paribas and Deutsche Bank are included in the group required to raise bail-inable bonds.
Some bankers worry that forcing senior bondholders to pick up part of the cost for future bank rescues could crimp investor demand for bank bonds and push up bank funding costs.
Our Joe would not like to see that. It would mean automatic downgrades for our quango banks. If Hockey’s pragmatic idealism can bridge all, or any, of these gulfs then truly he will have punched above his weight. But perhaps it’s just that peculiar brand of Australian innocence in action:
US Federal Reserve Chair Janet Yellen on Saturday was reportedly stopped by security and asked for ID as she entered a restaurant at the Intercontinental hotel in Sydney.
Wall Street Journal journalist Ian Talley says the central bank chief had to rifle through her purse to produce ID.
That granny looks a bit lost, eh?
