G20 sells $2 trillion economic plan to create millions of jobs

The world's top economies have embraced a goal of generating more than $2 trillion in additional output over five years while creating tens of million of new jobs, signaling optimism that the worst of the crisis-era austerity is behind them.

The final communique from the two-day meeting of Group 20 finance ministers and central bankers in Sydney said they would take concrete action to increase investment and employment, among other reforms. The group accounts for around 85 percent of the global economy.

"We will develop ambitious but realistic policies with the aim to lift our collective GDP by more than 2 percent above the trajectory implied by current policies over the coming 5 years," the communique said.

Australian Treasurer Joe Hockey, who hosted the meeting, sold the plan as a new dawn for cooperation in the G20.

"We are putting a number to it for the first time - putting a real number to what we are trying to achieve," Hockey told a news conference. "We want to add over $2 trillion more in economic activity and tens of millions of new jobs."

International Monetary Fund chief Christine Lagarde said the meeting was held in an "excellent spirit".

"We believe that if the reforms that have been identified are adhered to, delivered by the various authorities, then that is a goal that can be achieved or possibly exceeded," Lagarde said on Sunday.

The deal was also something of a feather in the cap for Hockey, who spearheaded the push for growth in the face of some skepticism, notably from Germany.

"What growth rates can be achieved is a result of a very complicated process," Germany's Finance Minister Wolfgang Schaeuble said after the meeting. "The results of this process can't be guaranteed by politicians."

Australia is acting as president of the G20 this year, following Russia in 2013 and ahead of Turkey next year.

While shifting the focus to reforms that would lift global growth in years to come the group acknowledged that monetary policy would need to "remain accommodative in many advanced economies and should normalize in due course".

The growth plan borrows wholesale from an IMF paper prepared for the Sydney meeting, which estimated that structural reforms would raise world economic output by about 0.5 percent per year over the next five years, boosting global output by $2.25 trillion.

The IMF has forecast global growth of 3.75 percent for this year and 4 percent in 2015.

As yet there was no road map on how nations intend to get there or repercussions if they never arrive. The aim was to come up with the goal now, then have each country develop an action plan and a growth strategy for delivery at a November summit of G20 leaders in Brisbane.

"Each country will bring its own plan for economic growth," said Hockey. "Each country has to do the heavy lifting."

Agreeing on any goal is a step forward for the group that has failed in the past to agree on fiscal and current account targets. And it was a sea change from recent meetings where the debate was still on where their focus should lie: on growth or budget austerity.

Financial markets had been wary of the possibility of friction between advanced and emerging economies, but nothing suggested the meeting would cause ripples on Monday.

"The text of the communique indicates that the standard US line that what is good for the core of the world economy is good for all seems to have won out," said Huw McKay, a senior economist at Westpac, an Australian bank, noting there was nothing that could be taken as "inflammatory" about recent volatility in markets.

Reuters-AFP

(China Daily 02/25/2014 page12)