G20 finance ministers set out plan to boost global growth

Australian Treasurer Joe Hockey

Australian Treasurer Joe Hockey

Published Sep 22, 2014

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Ian Chua and Cecile Lefort Cairns, Australia

THE GROUP of 20 (G20) leading nations say they are tantalisingly close to adding an extra $2 trillion (R22 trillion) to the global economy and creating millions of jobs, but Europe’s extended stagnation remains a major stumbling block.

The finance ministers and central bank chiefs gathering in the Australian city of Cairns claimed progress on fireproofing the world’s financial system and on closing tax loopholes exploited by multinationals.

They also dealt with the thorny problem of whether to invite Russian President Vladimir Putin to the G20 leaders’ summit in November given events in Ukraine, with the consensus being to maintain diplomatic pressure but leave the door open for his attendance.

“We are determined to lift growth, and countries are willing to use all our macroeconomic levers – monetary, fiscal and structural policies – to meet this challenge,” said Australian Treasurer Joe Hockey, who hosted the event.

Almost 1 000 measures were proposed that would boost the global growth rate by 1.8 percentage points by 2018, near the ambitious goal of 2 percentage points adopted in February.

The proposals will now go for formal approval at the G20 leaders’ summit in Brisbane in November. Chief among them is a global initiative aimed at increasing private investment in infrastructure.

There was surprisingly little said about China’s slowdown, at least publicly. That struck some as odd given the Asian giant is just behind the US in the size of its economy.

“Our basic point on the aspirational growth target is that with China slowing down in a structural sense… it will be exceedingly difficult to hit that [2 percentage points] number,” Huw McKay, a senior international economist at Westpac, said.

Chinese Finance Minister Lou Jiwei noted that stimulus measures brought problems such as excess capacity, environmental pollution and growing local government debt, just the latest sign that any Chinese policy easing would be limited.

The risks that super-loose monetary policy could inflate asset bubbles was much discussed by the G20

, along with the need for the US Federal Reserve to avoid spooking markets as it winds down its quantitative easing campaign.

Also on the drawing board were plans to stem the loss of revenue from multinationals shifting their profits to low-tax countries, potentially reclaiming billions of dollars.

The taxation arrangements of global companies such as Google and Apple have become a hot political topic following investigations into how many companies reduce their bills.

“We have endorsed far-reaching initiatives to identify and catch tax cheats through the automatic exchange of information using a common reporting standard,” Hockey said. – Reuters

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