The mood was cautious this week as more than 400 business leaders from G20 countries met in Sydney to discuss what the private sector can do to support the global economic recovery.
Weak conditions are piling pressure on the G20 – and in turn global businesses – to deliver faster growth.
Australia was the perfect setting for the Business 20 summit (B20), because the country has witnessed an unprecedented economic growth phase that started way back in 1992 and is still chugging along, albeit at a slower pace.
There are many lessons from Australia’s experience for G20 countries
There are many lessons from Australia’s experience for G20 countries, particularly those faced with macroeconomic challenges.
True, a natural resources boom – thanks to Chinese demand – has helped lift Australia’s economic fundamentals, but at the same time, Australian policymakers have got more than a few things right. A sound and stable financial sector has underpinned economic growth and strong job creation has made the upturn more equitable – all in all, a seemingly simple menu of policy recipes that has helped Australia to reap rich economic rewards.
Key messages for the G20 leaders
Not surprisingly, and in a welcome development, Australia’s B20 organisers made sure to distil this sensible thinking into something usable for the G20. Participants attending the B20 summit in Sydney were given a postcard at the concluding session with a set of key economic messages for the G20 summit in Brisbane in November:
- The urgent goal is growth and jobs. Now that the global financial system has been stabilised, the core question facing leaders is how to increase the slow pace of economic growth and create jobs to lift living standards around the world. There is no room for complacency.
- G20 is the right forum to pursue this goal. The G20 is the only forum capable of achieving the coordinated action necessary to drive and shape the global economy.
- G20 has set a realistic and necessary growth target.The G20 target of lifting global economic growth by 2 per cent above the trajectory implied by current policies over the next five years is entirely appropriate, but the question is how to achieve it.
- B20 has identified ways to meet the target. Business leaders from G20 countries have looked at the major impediments to growth and jobs creation and believe that policies are needed to ensure greater structural flexibility and freedom of movement across borders of all goods, services, labour and capital. These must be implemented within an effective regulatory framework that promotes transparency and credibility in commerce.
- The recommendations of the B20 require unilateral action by the G20. The B20 has developed twenty recommendations that will promote economic growth and jobs, but to be effective they require collective agreements by the G20 for unilateral action by each member country.
Policymakers should not build a regulatory system that hampers the ability of financial institutions to supply credit
We have been deeply involved in this year’s B20, and our Group Chief Executive, Peter Sands, co-chaired a task force on financing growth, which suggested ways for the financial sector to support the global recovery.
The task force acknowledged that sound regulation of the financial sector is critical for the proper functioning of markets and an important enabler for sustainable and long-term economic growth.
However, it urged policymakers not to build a regulatory system that hampers the ability of financial institutions to supply credit, and recommended that global rules are refined to lessen their negative impact on financial inclusion, infrastructure financing and trade finance.
Emerging markets should be better represented in global rule-setting
The task force also urged a more effective representation of emerging market economies in global rule-setting, as economic power continues to shift from West to East.
The issue of financial inclusion resonated particularly at the B20 summit. Many delegates feel that new prudential and conduct regulatory standards for banks are inadvertently restricting access to finance, particularly for emerging market economies and small and medium-sized enterprises.
The financial sector supports strong anti-money laundering measures, but the B20 recommends that the G20 leaders consider ways in which regulatory objectives can be achieved while mitigating unintended consequences.
Getting this balance right will make all the difference in helping the G20 achieve its core objective of fair and balanced growth for the global economy.