On the eve of the Brisbane 2014 Summit and Australia’s first presidency of the G20, Sherpa Dr Heather Smith discusses just how much the G20 has become an indispensible beacon for world leaders and a key means of engineering future global prosperity.
As Sherpa during Australia’s G20 presidency, it is a pleasure to contribute to the Australian Institute of International Affairs’ G20 conversation. As the AIIA well understands, the world is undergoing significant transformation. The changes to the global economic landscape that made the G20 indispensable in 2008 are ongoing.
A Changing World and a Global Economic Dynamism
The increased globalisation of markets and the advance and spread of modern technology means national interests are increasingly interdependent, propelling traditional domestic economic matters like monetary policy, taxation, financial regulation and infrastructure to global concern.
The shift of global economic weight towards emerging markets is accelerating and underscores the need for new modes of cooperation. Emerging markets and developing economies already contribute more than two-thirds of global growth.
According to the World Bank, the six largest middle-income economies – China, India, Russia, Brazil, Indonesia and Mexico – account for 32.3 per cent of global GDP, whereas the six largest high-income economies – United States, Japan, Germany, France, United Kingdom and Italy – account for 32.9 per cent. By 2050, four of the five largest economies in the world are projected to be in Asia – China, India, Indonesia and Japan.
A Forum for Leaders
The G20 is an apt model for global cooperation in today’s world. Its response to the Global Financial Crisis is a testament to the impact G20 members can make when working together. The G20 introduced trillions of dollars in fiscal stimulus packages worldwide, which saved or created millions of jobs that would otherwise have been destroyed. It also put in place measures to limit the collapse of financial markets and help maintain consumer and business confidence.
Over the past five years, the G20 has framed the world’s efforts to restore growth and build the resilience of financial institutions and national economies. It led the world out of an economic crisis and through the initial stages of recovery. With the world now free from immediate crisis, the G20 can increasingly shift its attention to driving practical actions that will lead to sustained global growth. In 2014, the global economy continues to produce far less than it would have if the crisis had not occurred – there are tens of millions fewer jobs and global trade growth is still too slow. While always remaining vigilant to risks and vulnerabilities, the G20 is now more focused on improving the future of our economies and implementing the measures to get us there.
An Action Plan for Catalysing Growth
Addressing this requires shared ownership of the solution to lifting growth – both collectively and domestically. This is starting to happen. The G20 Finance Ministers’ commitment in February 2014 to lift their economies’ output by more than two per cent over the next five years – over and above the current trajectory – is the first time we’ve seen countries sitting down together and setting a meaningful goal for the way their actions combined will benefit the global economy, not just their own. This will make a significant difference; a boost of over $2 trillion to global GDP with the promise of millions of additional jobs.
To pursue this growth ambition, the Brisbane Action Plan, to be considered by G20 Leaders at the November Summit, will include individual and collective actions to boost growth and jobs and build economic resilience. In addition to macroeconomic policy, members have agreed the focus needs to be on domestic policies aimed at improving investment, trade, employment and competition – critical areas where growth can be achieved. As Australia’s Prime Minister Tony Abbott said in January at the World Economic Forum, we are committed to working with G20 members to develop concrete, practical actions that materially improve growth and build resilience in the global economy. Recognising that it is business that is the key driver of growth and jobs, members are working on a multi-year approach to removing impediments to private sector- led growth. This is a priority that Australia is taking forward in 2014, as we aim to deliver a multi-year package of measures on investment and infrastructure. Equally business and the community need to work with G20 governments to help create domestic environments conducive to structural reform.
Embracing the Big Picture
At the same time, the G20 will continue to work hard on strengthening macroeconomic policy coordination among member governments. Macroeconomic cooperation is an important function of the G20 and significant progress has been made this year to strengthen it. Beyond the global growth challenge, G20 members have also reiterated the importance of building a more resilient global economy and are committed to substantially completing key aspects of the core reforms set out in the financial regulation agenda. This will provide greater certainty in the regulatory environment and support confidence and growth.
G20 members are also progressing action on strengthening tax systems and global energy markets, combatting corruption, and empowering development. The latter is central to the G20’s objective of achieving strong, sustainable and balanced growth and ensuring a more robust and resilient economy for all, and pervades all areas of the G20’s agenda. Ongoing work includes a review into the links between jobs, growth and food security, including actions that lift agricultural productivity.
Members continue to draw on the advice of major international organisations. Input from the IMF, OECD, World Bank, the Financial Stability Board, the International Labour Organisation, the WTO, the UN and other international organisations is crucial for G20 leaders. They support G20 members as they work together to find solutions to the challenges.
Australia’s G20 Presidency: focus, engagement, collaboration
As members prepare for the Brisbane Summit, Australia will continue to look for ways to improve the forum and help secure it as the key institution for international economic governance. As chair, we are taking a disciplined approach, focusing tightly on areas where the G20 can best make a real difference, while finding ways to maintain political momentum in the absence of an immediate crisis.
Governments alone cannot solve the economic challenge. All parts of society have a part to play and have a significant stake in G20 outcomes. This was recognised in the 5th Anniversary Vision Statement that Leaders agreed upon at the Saint Petersburg Summit last year. G20 engagement groups, representing sectors that operate across borders – whether it be the trade of goods and services, the breadth of civil society activities, labour conditions, the ambition of youth or the contest of ideas – also contribute to the discussion about the G20 agenda. As major international economic actors, these groups have constituencies in most G20 countries and have a voice in getting governments to respond to challenges.
Australia takes this seriously, with strong engagement with groups outside government a key characteristic of our approach this year. The Australian presidency was closely involved with the C20 Summit and the Think 20 meeting in June. These are important opportunities to increase our understanding of how policies affect others and to help ensure broad political support for G20 outcomes.
We are also placing a high priority on engagement with other countries, particularly developing countries, to ensure the benefits of growth and resilience in the global economy are widely shared.
A Stage Well Set
Although we still have much to do as we head towards the Brisbane Summit, we are pleased with the hard work of members through the first part of the year. The engagement groups too have tightened their focus and are well positioned to deliver useful, relevant recommendations. It is clear we all want the G20 to make a real difference to people and businesses around the world; we need to keep working hard to build this positive momentum for change.
The G20’s membership gives it balance and depth, pulling together economies that represent a wide diversity of experience and views. Its relatively informal structure and functioning allow both flexibility and frankness in discussions. It has proven itself relevant to the concerns of all. It is a vital forum for the 21st century.
Dr Heather Smith is the Deputy Secretary, G20 Sherpa in Department of Prime Minister and Cabinet.
This is an extract from G20: Words into Action Brisbane 2014 published by Faircount Media in association with the Australian Institute of International Affairs in October 2014.