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About the project

From 2012 to 2016, the G20 Studies Centre at the Lowy Institute for International Policy produced independent research on global economic governance and the role of the G20, and supported research networks in Australia and overseas. The Australian Government provided funding to establish the Centre.

The archives of the Centre’s quarterly G20 Monitors (as well as other publications from the G20 Studies Centre) are available below. The Monitor brought together opinions from Australia and around the world to discuss developments in the G20 and suggest policy ideas.

The Lowy Institute will continue to comment and publish on economic governance issues.

Latest publications

What to expect from the Sydney G20 Finance Ministers' meeting

G20 finance ministers quantitative easing sydney

G20 finance ministers and central-bank governors will gather in Sydney this weekend. The forecast is for possible showers. But will it rain on Australian Treasurer Joe Hockey’s parade?

As the Treasurer has said, 'It’s a big event.' Notwithstanding the fact that the finance ministers from South Africa, Brazil, Italy, Mexico and the World Bank President have dropped out, the line-up is still impressive.

Having all these finance dignitaries in Sydney may be a big thing for Australia, but will it be a 'big thing' for the rest of the world? That will depend on what is discussed and the progress made in dealing with some pressing global economic issues.

The press build-up to the meeting suggests there will be a clash between the emerging markets and the US Federal Reserve over quantitative easing (QE). The Indian Central Bank Governor received much publicity when, while commenting on recent volatility in emerging markets, he said that 'international monetary cooperation had broken down.' The headline in the Wall Street Journal on 19 February was 'Emerging Economies to Face Aligned Germany, US at G20 Meeting'. Hockey is reported as saying that he is 'backing' the US Fed taper of quantitative easing.

Tension at a G20 meetings is, overall, a good thing. It means something is happening. 

But it is to be hoped that there is a balanced discussion over the issue of volatility in emerging markets and the impact of QE tapering. It is not a case of taking sides. The recent bout of emerging-market volatility was not the result of a recent decision by the US Fed. As Tim Adams from the IIF notes, 'recent volatility in these markets seems to reflect increased investor concerns about macroeconomic imbalances, dependence on external financing and other political and policy uncertainties'.

But Governor Rajan is quite right to say that 'the US should worry about the effects of its policies on the rest of the world'. Stronger growth in the US is a positive, but how the US withdraws from QE will have major implications for all countries.

As the IMF has warned, unwinding quantitative easing too quickly could rock global markets. The challenge confronting the global economy is to adjust to a 'normalisation' (that is, a raising) of interest rates. This will prove a challenge for large bond holders, governments with substantial debt loads, corporations which have borrowed on the expectation that low rates will stay for an extended period, and banks which granted loans on a similar misplaced assumptions.

As the IMF has noted, misjudgements by the US Fed on QE tapering could see global interest rates jump abruptly, causing turmoil across world financial markets.  So there is no place for pointing fingers at this G20 meeting.

Another major issue is Treasurer Hockey's plan to get agreement on a global growth target. Again, this appears to be an area of tension, with reports that German officials are ‘extremely sceptical about the proposals of some G20 partners for agreeing binding quantitative goals (for growth)’, noting that this would be a 'slightly antiquated form of economic planning'.

If the Australian aim is just to get agreement on a quantitative global growth target, the German officials are right. Such targets are not binding and are too diffuse for individual countries to feel they are accountable for meeting it. Moreover, the G20 has basically been there before. The headline from the July 2013 G20 Finance Ministers' Meeting was 'G20 agrees global growth targets in Moscow'. Yet while past G20 meetings regularly agreed that global economic performance was not good enough and 'agreed' to boost growth and create jobs, the track record of doing something about it was poor.

Having a 'growth target', even an aspirational one, only has meaning if it is accompanied by a  plan for how the increase in growth will be achieved, and if countries feel responsible for implementing the plan. It is to be hoped that by referring to a growth target, Hockey is trying to focus the minds of his colleagues on the need for the G20 to have a comprehensive growth plan. Because it needs one. But each G20 member also needs its own growth strategy.

Having a growth plan is only the first step. To make it meaningful, it has to be implemented. The best way to help ensure that plans are implemented is to directly involve the public in each G20 country. Rather than making commitments to boost growth at international meetings, G20 leaders and ministers should be outlining to their citizens how they intend to lift growth in their own countries.

Let's hope that one of the outcomes from the meeting is an agreement by all G20 members to bring to the Brisbane Summit comprehensive plans to lift growth, but that in advance they will present a draft of their plan to their citizens for comment and scrutiny. Achieve this, and the meeting will be a 'big thing' for the world and not just for Australia.

Photo by Flickr user Rotholandus.

Global cooperation among G20 countries: responding to the crisis and restoring growth

At the outbreak of the global financial crisis, 2008, the G20 was widely acknowledged as helping prevent an even more serious decline in the global economy. It helped to calm the panic in financial markets and articulate a set of possible policy options to restore global stability and growth. However, as the dual-track recovery set in, policy options for advanced economies and EMEs diverged. Within this context, this book will explore the scope for cooperation amongst the G20 and the diverging challenges and the intricate interconnectedness of policy options between advanced economies and the EMEs within the G20.


Global Cooperation Among G20 Countries can be purched online.  

The G20 needs a growth strategy

In this Lowy Institute Policy Brief, Director of the G20 Studies Centre Mike Callaghan AM argues that the G20 needs to develop a comprehensive growth strategy to lift global growth and create jobs. Callaghan outlines the steps required to develop such a strategy by the Brisbane G20 Summit.

G20 outreach and non-G20 member views on the G20

This issue of the Monitor addresses the issue of G20 outreach and presents a collection of perspectives from non-G20 member countries on the role and performance of the G20. The contributors have been asked to identify where the G20 process can add value and how it can be improved.

Tony Abbott's G20 vision at Davos: It's a start

On 23 February Prime Minister Abbott delivered a much anticipated speech to World Economic Forum at Davos outlining Australia's vision for the G20. The immediate response on Twitter was largely negative. 

Chris Giles from the Financial Times tweeted: 'sign of the times, Rouhani (President of Iran) packs out the hall. Everyone leaves before Tony Abbott explains Australia's ambitions for the G20 in 2014'. Was the apparent lack of interest a comment on Australia, the G20 or the Prime Minister? Giles followed up with a tweet saying 'Abbott uncomfortable with all this G20 stuff'. A bit harsh.

This was a speech by the Prime Minister, rather than one largely drafted by officials. As a former official, I am sure that any draft submitted to the Prime Minister would have had more about Australia's priorities for the G20 in 2014. But the prospects of achieving any meaningful outcomes from the G20 Brisbane Summit will not come from what officials write, but what the Prime Minister believes in. He is in the chair for the summit and he will set the tone. We heard comments based around the Prime Minister's key beliefs, and these are largely centred on the fundamental role of the private sector in driving growth. 

The three specific priority areas for the G20 mentioned by Abbott were trade liberalisation, combating tax avoidance and evasion, and encouraging infrastructure investment. This is appropriate, but what still remains to be outlined is how Australia intends to progress these objectives.

The most notable thing from the Prime Minister's speech was the reference to a three-page communiqué from the Brisbane Summit. If this can be achieved, it would compare well with the 27-page leaders' declaration at St Petersburg (and over 400 pages of supporting documentation).

Prime Minister Abbott deserves a bouquet for his commitment to brevity. But producing a short, meaningful and agreed upon communiqué is significantly harder than agreeing on a longer statement. Stick with it, PM.

The speech was, of course, only part of the Prime Minister's engagement in Davos. His arguably more important commitments were his meetings with other leaders. In his speech he said 'I promise you: we will make your trip worthwhile'. I hope he convinced the G20 leaders he met in Davos that a trip to Brisbane in November will be worth it and gave them a sense that there will be some significant outcomes from the Brisbane Summit.

Bottom line: there wasn't much new information about Australia's priorities for the G20 in 2014, but at least the Prime Minister is beginning to engage on the issue.

The implications of emerging economies' market depth for Australia's G20 presidency

In its current print edition, the Economist has a fascinating chart that deserves much greater attention than the small section devoted to it. It matches the combined value of listed firms in various emerging markets with global companies that have similar market capitalisation.

Indonesia's market is the size of Goldman Sachs, Facebook matches Malaysia and India is comparable to Nestlé. It is well known that a bunch of multinationals outstrip entire countries in economic value and performance. Nonetheless, the resulting map is quite extraordinary in reminding us of how unequal the world economy is. 

The chart raises another important point: the lack of market depth in emerging countries. Deep markets are more resilient and less sensitive to changes in supply and demand. This is important for investors, especially long-term investors, as markets are more predictable and less risky. Market depth concerns Australia because it is a problem for many of the leading economies in our region.

It should also concern Australia in its capacity as the 2014 G20 chair. The Australian G20 presidency has indicated that one of its priorities will be infrastructure investment. But stepping up infrastructure investment in a truly global fashion (including in the emerging and developing world) will require tackling the issue of insufficient market depth in emerging countries.

Emerging Asia, in particular, has massive savings. But instead of investing these savings in productive projects addressing the continent's obvious infrastructure gaps, much of it flows to the advanced world. This creates a 'chicken and egg' problem, where investors are reluctant to commit to emerging markets because of insufficient scale, but scaling up requires precisely that type of strong investment.

The Australian G20 presidency will have to push for finding solutions to this issue if it wants to make a true impact with its investment agenda.

Failure to act on IMF reform damages US (and G20) credibility

The insularity of the US Congress should never be underestimated. It has blocked (again) the implementation of IMF governance reforms. This has damaged the credibility of the US, the IMF and the G20. Nancy Birdsall from the Center for Global Development said 'as an American citizen, I'm embarrassed'. Ted Truman from the Peterson Institute said that the US kicked an own goal when it comes to global economic leadership.

The reforms to the IMF that the Obama Administration had submitted to Congress as part of its appropriation bill (and the good news is that Congress did agree on aspects of appropriations, removing the threat of another federal shutdown for over nine months), were those agreed with much fanfare by the G20 in 2010. The reforms would have doubled IMF quotas to $720 billion and shifted 6% of quota to emerging markets (an IMF member's quota determines both its financial commitment to the Fund and its voting power). Europe was to reduce its current representation on the 24 member IMF Executive Board by two so as to make room for more directors from emerging markets. In addition, the formula for deciding quota allocations was to be revised and the next review of quotas was accelerated to January 2014. The expectation was that there would be a further shift in quota shares to emerging markets as part of this review.

The IMF Managing Director expressed her disappointment and noted that the reforms were to ensure that the governance structure of the IMF was brought into line with the changes in the global economy, particularly the rise of the emerging markets. Not surprisingly, the reforms are considered extremely important by the emerging markets and they also expressed their disappointment and called on the IMF to implement the reforms.

But it is not up to the IMF. It all depends on the US Congress. Major reforms in the IMF require an 85% voting share approval. With a share of 16.75%, the US has a veto. If the reforms had been passed, the US voting share would have declined only slightly and it would have maintained its veto. So the world waits for US leadership. When will that happen?

As Truman notes, US credibility has been damaged. The US will be less trusted to honour agreements in this area. The BRICS will continue to criticise the IMF as being excessively dominated by advanced countries and will continue to promote alternative bodies, such as a BRIC development bank and currency support arrangements. And the credibility of the G20 has also taken a body blow. The reform of IMF governance was meant to be one of its major achievements.

Australia is in the chair of the G20 this year and will need a handling strategy on IMF reform. The quota reforms that were to be completed by 2014 will not be advanced until the 2010 package is ratified. Oh how Australia wanted the US Congress to do the 'right' thing. So what now?

Here are my suggestions for what the G20 should do.

First, push on, but with a vengeance. Instead of issuing communiques saying, 'we are committed' to ratifying the 2010 package of reforms and 'we attach high importance to securing continued progress', as was the case in the St Petersburg declaration, directly criticise the US Congress for failing to support the reforms. The US Administration should not mind; it supports the reforms and has been battling to get them passed. Will the US Congress listen to the rest of the world? Unlikely. But for the sake of the credibility of the G20, it should at least try.

Second, put on the table the need to remove the US veto in the IMF by reducing the size of the 'super majority' voting requirements.

Thirdly, and importantly, move on from just talking about 'shares and chairs' when it comes to IMF reform and intensify the questioning as to whether the IMF is effectively fulfilling its responsibilities. For example, review whether it has been even handed in its treatment of members, and whether it can effectively provide a global financial safety net given the concerns of emerging markets over a possible increase in capital volatility. This would include looking at its relations with regional safety nets. 

This is not to say that the G20 should be replacing the IMF's governance arrangements. But if there are concerns about the appropriateness of the Fund's governance and there is a blockage in advancing any reform, it is appropriate for the G20 to be asking the 'big' questions as to whether the IMF is performing the role that is required by the global community. In fact, if the G20 is a global economic steering committee, it should be doing this with respect to every international economic body.

Photo by Flickr user NASA APPEL.

Australia takes the G20 chair: Now what?

The starter's gun has fired on Australia's G20 presidency. It was a low key start.

Australia's G20 overview for 2014The Prime Minister's media release was very brief. This is a positive. The G20 should always be business-like, with the focus on achieving substantive outcomes rather than on the event itself. Start to worry if we hear plans for fireworks displays or cultural performances at the Brisbane Summit.

Australia has released an overview for its G20 presidency. It is also commendably brief. Let's hope this brevity is maintained throughout 2014, particularly when it comes to leaders' declarations and communiques. But of course it is always a lot easier to write a short statement when there is something of substance to say.

Australia's stated theme for the G20 in 2014 is appropriate: promote stronger economies and jobs growth and build a more resilient global economy.

But the Brisbane summit will not be remembered for fine-sounding objectives. Its legacy, and Australia's reputation as chair, will depend on delivering on the task identified by the Prime Minister in his introduction to the overview, namely that 'the challenge of the G20 this year will be to make concrete decisions and take real steps that will improve people's lives.' This hits the nail on the head.

One positive aspect of the outline of 2014 priorities is that Australia is not placing additional items on the G20's agenda. However, it is not clear from the overview document how Australia will prioritise the 10 listed agenda items. The description of each agenda item in the overview document is very general.

The strategies to promote growth that are mentioned — improving productivity and competitiveness, strengthening investment in infrastructure, making it easier to do business — do not require international agreements. Their implementation will depend on the policy choices taken by each G20 member. And as is clearly evident in the case of the US, the major impediment to their implementation is domestic politics. Of course, all countries will benefit if the major economies take the necessary steps to lift their growth rates.

What is absent from Australia's overview for the G20 in 2014 is the need to deal with negative spillovers — where the actions of one country can have profound impacts elsewhere. As identified by the IMF, policy spillovers may well turn negative in 2014, particularly with the exit from quantitative easing by central banks in some of the major economies. With the volatility that may come from the tapering of quantitative easing likely to be a major concern for emerging markets in 2014, it is unfortunate that there is no mention of this, even in general terms, in Australia's outline for the G20.

The overview document also does not indicate where Australia will be seeking concrete decisions in the areas that clearly require international cooperation, particularly international trade and tax.

The document says that the G20 will focus on removing 'obstacles to trade', but there is no mention of the future of the multilateral trade negotiations and the WTO.

It is laudable that Australia has indicated that it will lead stronger international cooperation to combat tax evasion and profit shifting, but there is no indication as to what it will attempt to do in this area in 2014. And it is difficult to reconcile the Prime Minister's comments that cutting taxes will be on the G20's agenda in 2014, for the tax challenges facing G20 members vary depending on their domestic circumstances and efforts to achieve sustainable fiscal positions.

One clear objective is identified in the overview document: a priority to 'complete' reforms aimed at strengthening financial regulation in four areas. These are: building the resilience of banks; helping prevent and manage the failure of globally important financial institutions; making derivatives markets safer; and improving oversight of the shadow banking sector.

The greater challenge, however, is ensuring the consistent domestic implementation of new financial standards. More generally, there is a pressing need for the G20 to be more strategic in its assessment of whether the Financial Stability Board's efforts to strengthen financial regulations are contributing to more stable financial systems that meet the needs of the real economy.

Strengthening energy markets gets a mention in Australia's G20 overview, but there is a conspicuous absence of any reference to dealing with climate change. Climate change is on the G20 agenda and Australia cannot ignore the issue as chair.

Australia is at the start of a busy year and it is to be hoped that it will deliver in ensuring that the G20 achieves concrete results on some key international economic issues. But we are still waiting to see what will be the few specific areas where Australia will be seeking to make a major contribution as G20 chair.

Think20 papers 2014: policy recommendations for the Brisbane G20 Summit

On 1 December 2013, Australia began its twelve-month presidency of the G20, a role that will culminate with the chairing of the Brisbane G20 summit, 15-16 November 2014. The ‘Think20’ is a network of think tanks and academics from G20 countries that are working to provide an important analytical input into the G20 process.

The first Think20 meeting was held under the Mexican G20 presidency in 2012, the second under the Russian G20 presidency in 2013. With support from the Australian government, the first Think20 meeting under Australia’s G20 presidency will take place on 11 December 2013.

Participants in the December meeting have authored a paper on one (or more) of the following four themes, that make up this collection*: 

  • The G20 economic/finance process
  • Trade liberalisation 
  • Financing for investment/infrastructure 
  • Development. 

Each author was asked to identify, in their chosen area, specific actions and achievable outcomes that the G20 should pursue in 2014. 

A discussion on these policy recommendations will take place at the 11 December Think20 meeting, the outcome of which will be submitted to G20 Sherpas. It is hoped that Think20 participants will maintain an on-going dialogue on the issues contained below throughout 2014 and beyond.

 

 

 

 

 

 

*Four papers included below are not contained within the Think20 Papers 2014 PDF, these are Christophe Destais' 'The international monetary system as a swap nexus', Karel Lannoo's 'The G20, five years on', David Shorr, Drew Kodjak and Sheila Watson's 'Global Fuel Economy Initiative' and Joshua Busby's 'The G20 and Climate change – beyond goal-setting at Brisbane'.

With 365 days until the Brisbane summit, Bishop outlines Australia's G20 agenda

Hugh Jorgensen is a Research Associate in the Lowy Institute's G20 Studies Centre.

Last night in her address to Commonwealth foreign ministers, who are meeting in Sri Lanka for a Commonwealth Heads of Government Meeting, Julie Bishop took the opportunity to outline Australia's vision for 'the G20 2014 Agenda.'

Although both the Treasurer and the Prime Minister have made post-election references to Australia's plans for the G20, Bishop's remarks constitute the first fully dedicated speech on the subject by a minister in the new Coalition Government.

The speech is also quite timely, in that is now precisely twelve months until the G20 Brisbane summit is held on 15-16 November on Brisbane's South Bank.

Although there are still sixteen more days before Australia officially takes over the G20's reins from Russia, the symbolism of the Foreign Minister outlining a G20 agenda for 2014 at this early stage suggests the new government has begun to grasp the opportunity that chairing the G20 represents for Australia (hopefully the Russians won't be too miffed by Australia's eagerness). The Treasurer's recent admission that he had 'underestimated the size of the G20 leadership task' further highlights this shift. 

Bishop outlined three priority areas: lifting economic growth, creating jobs and improving access to financial services.

The first two priorities, both carry-overs from the Russian presidency, are fairly high-level objectives, and the Foreign Minister outlined the various angles from which the Australian Government would seek to address them in 2014:

  • By generating greater productive investment from the private sector.
  • By removing 'unnecessary regulation and red tape'.
  • By encouraging the leveraging of funds from international institutions to incentivise private sector investment in emerging-economy infrastructure.
  • By supporting multilateral trade (sort of, see below) and the role the G20 should play in pursuing it.
  • Strengthening the international financial sector, particularly through reform of the IMF and the Financial Stability Board.
  • Tackling tax evasion and the loss of tax revenue that developing countries incur as a result of inadequate tax administration.

The Foreign Minister did not really elaborate on the third stated priority — improving 'access to financial services' — beyond noting that it was 'fundamental to developing countries...small and medium enterprises and women's economic empowerment.'

If the government can achieve tangible outcomes — or at least meaningfully advance negotiations — on its stated priorities, it would be quite a win for the G20 and for Australia as chair. Indeed, even if the G20 is simply able to realise Bishop's hope for an agenda that is 'not too crowded...able to achieve outcomes of global benefit...and vibrant enough to attract the energy of the leaders of the G20,' this would be a marked reversal in the otherwise desultory nature of recent G20 summits

But of course, if wishes were fishes, I'd eat salmon all day long (I think that's how it goes). The G20 specialises, or at least ought to specialise, in dealing with transnational issues that are beyond the remit of any single government to resolve. And if such problems were easy to fix, they would not have made it to the G20 for discussion in the first place.

Statements like 'what nations need to do now is get their private sectors activated to drive growth and employment,' and 'the new (Australian) government has resolved to (remove) a billion dollars' worth of red tape each and every year,' point to issues which are mostly domestic in nature. Similarly, these days, IMF reform is almost entirely a matter for the US Congress, regardless of how much 'pressure' the rest of the G20 attempts to bring to bear upon it. 

For the G20 to navigate its way through difficult transnational problems while simultaneously accommodating the tricky domestic politics of certain G20 countries (for example, climate change was not mentioned in the speech), Australia, as chair, will have to provide a good deal more clarity on precisely what it is that the G20 can uniquely bring to restoring global growth.

Bishop's comments on getting global trade 'back on track' are also a little vague: 'many parts of the world are building networks of bilateral and mutual free trade agreements. We hope that with that kind of momentum we will effectively end up with a multilateral outcome.'

One would certainly hope so, because if the standards set by the 'regionalist' Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership trade agreements come to supersede those of the WTO, the global trading system as we know it may very well be off to join the choir invisible. It would be a black mark against the G20 if it were to let this happen, and it is in Australia's interest, as a middle power, to stand up for global trade multilateralism.

It is still early days, and the portion of Bishop's stated agenda that remains (or, alternatively, gets diluted into insignificance) by the time of the Brisbane summit depends on the willingness of the Prime Minister, the Treasurer and the rest of the Government to campaign and get the rest of the G20 on board over the next 365 days.

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