G20 leaders target trillions in new economic growth

Heads of states and international organizations pose for the "family photo" during the G20 Summit in Brisbane, Australia.
(Photo: AFP/Saeed Khan)

BRISBANE: G20 leaders representing the bulk of the world's economy on Sunday (Nov 16) committed to reform measures to lift their collective growth by an extra 2.1 per cent by 2018, despite evidence of a slowdown in some major nations.

The pledge - known as the Brisbane Action Plan - will push their combined growth beyond the two percent they were initially targeting in the drive to rehabilitate sluggish global economies and generate jobs. "This will add more than US$2 trillion to the global economy and create millions of jobs," leaders including US President Barack Obama and Chinese counterpart Xi Jinping said in a summit declaration after weekend talks in Australia.

The communique also agreed to a global initiative to help address a US$70 trillion gap in infrastructure needed by 2030 to improve productivity, by cutting red tape and matching private investment with capital projects. A hub to coordinate the G20's work on infrastructure by bringing together governments, the private sector, multinational development banks and other international organisations will be headquartered in Sydney.

The world's most powerful industrial economies also backed a global crackdown on tax avoidance by multinational companies, while stressing the importance of energy security to hitting the growth goals. "The benefits of that growth will be felt worldwide, not just in G20 member nations," Australian Prime Minister Tony Abbott, the G20 host, said of the 2.1 per cent target. "The Brisbane Action Plan and individual country growth strategies and employment plans have been made public so people around the world can see our commitments, hold us to account and witness our progress."

World Bank chief Jim Young Kim said higher and more inclusive growth was essential to cut poverty and reduce inequality, welcoming the commitments as "a much-needed boost to G20 countries and beyond".

Oxfam chief executive Winnie Byanyima echoed Kim's message that boosting growth must improve the living conditions of poorer families and reduce inequality, rather than simply benefit the rich. "While we welcome the G20's continued commitment to inclusive and sustainable growth, it must be followed up with actions to ensure the bottom 40 per cent benefit more than the top 10 per cent," she said.

'COMMENDABLE EFFORT'

On Saturday in Brisbane, Obama said the United States cannot "carry the world economy" and that other G20 nations must do more to spur growth and create jobs. Buoyed by unemployment at its lowest level since July 2008, the US economy is motoring at a time when other parts of the global engine room, notably Europe and Japan, are starting to splutter.

Australian Treasurer Joe Hockey said moving even further beyond the 2.1 per cent target would be possible if EU leaders start pumping billions of dollars into the stalling eurozone economy, where Germany and France have only narrowly escaped recession.

New European Commission chief Jean-Claude Juncker has previously outlined a reform agenda, including a €300-billion investment package to boost growth, employment and competitiveness. Exact details have yet to be presented. The G20's discussion on tax avoidance was a delicate one for Juncker, who stands accused of conniving at fiscal cheating by multinational companies when he was prime minister of Luxembourg.

In a report ahead of the G20 summit, the International Monetary Fund said the world economy faced stiff headwinds from sluggish growth in Europe and Japan and a slowdown in emerging economies. It trimmed its global growth forecast for the year to 3.3 per cent, from 3.4 per cent, citing geopolitical tensions and volatility in financial markets.

But IMF chief Christine Lagarde said the G20 this year had been "very productive". "I strongly welcome the determination of G20 members to implement growth strategies that we calculate would lift their collective GDP by at least 2.1 per cent by 2018," she said in a statement after the Brisbane summit. "This is a commendable effort, with significant benefits for the global economy. Implementation is now critical, with a strong accountability framework to monitor progress, supported by the IMF."

The G20 leaders also pledged to keep working to strengthen financial institutions, protect taxpayers from having to fund bailouts of "too big to fail" banks while addressing shadow banking risks. "These important reforms mean the global financial system is far more resilient than it was at the time of the crisis," their summit declaration said.