Worthy aspiration: JPMorgan’s Stephen Walters.Have political leaders ever run a campaign calling for slower economic growth? That’s one question that sprang to mind at Sydney’s G20 summit last weekend as journalists repeatedly asked finance ministers and central bankers about ”soft targets”, ”hard targets” and ”tangible targets”.
The focus on growth targets was, of course, a key part of the recently installed federal government’s push to nail down the economic leaders to what Treasurer Joe Hockey hopes would be a concrete agenda.
After the lack of any progress at the annual forum in St Petersburg last year, and with the final communique running to almost 30 pages, there was a general desire to bring the gathering back to its roots of focusing on economic co-operation and goals.
Yet, after what was seen as a win for the Treasurer in including a specific target in the (thankfully, only two-page-long) communique, was anything truly achieved at what has been described as just another international talkfest?
First, economists are quick to point out that having a target, in itself, is a win for Australia’s presidency of the G20 this year. Past summits have been a lot more vague and, as such, a specific figure is a ”worthy aspiration” for a group of nations that control more than 80 per cent of the world’s economy, JPMorgan’s chief economist for Australia Stephen Walters said.
But questions remain about how much action will result from a non-binding agreement, and how any progress will be measured.
”You mean they really weren’t trying before?” quips National Australia Bank chief economist Alan Oster.
”I haven’t changed my growth forecasts. It’s easy to say, ‘Let’s grow faster’, but the question is how. That’s the problem I have with it and that was what I was expecting all the way along.”
For Mr Walters, it is a question of how any such growth could and would be measured, and whether, come November, the participating countries would even remember they had signed up to the voluntary target.
”What would growth have been without the agreement?” Mr Walters asked. ”Measuring is going to be extremely hard and domestic politics will always kick in.”
The communique touched on structural reform, such as through lifting employment and participation, and enhancing trade and promoting competition. But again, these are standard goals to which any politician aspiring for higher office would subscribe.
Even less tangible was the communique’s two paragraphs on how monetary policy would be ”carefully calibrated and clearly communicated” – a nod to emerging nations’ gripes that the wind-back of developed countries’ stimulus programs (read United States) was causing economic and market volatility.
As analysts readily point out, central banks’ mandates are domestically focused, and their governors would be remiss to place the concerns of other countries above their own.
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