Building on the outcomes of the Russian presidency and the Saint Petersburg summit, the Australian presidency has entirely refocused the agenda of the G20 on the need to reignite growth and strengthen the ongoing–but still shaky–recovery by focusing on four priority areas: competition, trade, investment and jobs. This agenda has been very welcome and, one year on, is still (unfortunately) very relevant: the four cylinders of growth which the OECD Secretary-General cites in our editorial–investment, trade, credit and emerging market economies–are still running at low speed and below past trends. Most importantly, perhaps, the social cost of the crisis has become unbearable, undermining the confidence and trust of citizens in everything from governments to markets, businesses and institutions at large.
There are still 100 million unemployed in G20 countries and twice as many jobseekers globally. Youth unemployment is sky high and the number of young NEETs (not in employment, education or training) has risen by 5%, or 2 million people, since 2007. These ugly scars represent the social and human tragedy of mass unemployment. Moreover, the gap between rich and poor is at its highest level in 30 years.
Stronger growth: An overarching policy principle and goal
In this context, strengthening and further developing the growth narrative elaborated by the Russian presidency, was essential. But the Australian presidency went a step further: growth became the overarching principle behind the entire technical and political G20 process. Coupled with a rigorous streamlining of the G20’s burgeoning activities, this approach resulted in an extremely robust, coherent and focused growth-oriented G20 agenda.
This result was essentially achieved by crafting comprehensive National Growth Strategies. Australia’s was, in fact, the first presidency to systematically organise the convergence of the different G20 work streams–macroeconomic and structural policies, taxation, financial regulation, trade, employment, investment, etc.–into holistic growth strategies aimed at harnessing all available sources of growth and at activating the full range of policy levers. This approach went a long way towards breaking the silos, which were compartmentalising and isolating the various G20 channels of work from one another, by bringing the various pieces of the “growth jigsaw” together into a transversal, coherent and effective economic agenda.
The National Growth Strategies, which will be endorsed by G20 leaders at the Brisbane summit and which will form the backbone of the Brisbane Action Plan for Growth and Jobs, encapsulate, in accordance with specific national circumstances and idiosyncrasies, all the relevant growth-enhancing policy “ingredients”: supporting demand, as well as strengthening safety nets and targeted support, for the most vulnerable; raising productivity by bolstering competition in product and services markets; streamlining the regulatory environment; enhancing the efficiency of trade-enabling services and facilitating trade; and removing obstacles to investment, while promoting more inclusive labour markets, by activating employment policies to boost participation, addressing unemployment and investing in people’s skills and education.
Ambitious and quantified policy commitments
But the innovative approach engineered by the Australian presidency does not simply boil down to the enhancement of processes within the complex G20 architecture. It is also, and perhaps most importantly, about raising ambition and stepping up commitments. A step-change in the approach was the endorsement by finance ministers, at their meeting in February in Sydney, of a key measurable objective: to achieve, thanks to ambitious but realistic reforms, 2% additional growth by 2018 over a baseline scenario, as defined in October 2013.
This was quite simply a strategic masterstroke! Having a specific, well-defined, quantitative growth commitment and objective over the medium term focused minds, provided momentum and direction and galvanised members’ efforts. It also enhanced the public visibility of the G20. The 2% target became a powerful catalyst for ambitious commitments by countries in the framework of their National Growth Strategies. In other words, it became both the cornerstone of the G20 architecture and the touchstone for its efforts.
The OECD, a pivotal partner
The OECD has made key contributions to Australia’s efforts and initiatives. The OECD, jointly with the International Monetary Fund (IMF), identified the policy gaps in G20 countries hindering the achievement of strong, sustainable and balanced growth, estimated the upside growth scenarios–the 2% additional output–to be achieved by closing those gaps, and assessed the contribution of the almost 1,000 policy commitments submitted by G20 members to reach the 2% objective. This was both considerable and complex work. But it paid off: taking into account, among other elements, our analysis and recommendations, G20 members made tremendous efforts to beef up their strategies. According to joint OECD/IMF estimates, those efforts, if fully implemented, will make a difference and will get us very close indeed to the 2% ambition.
If the growth target has become the cornerstone of the G20 architecture, the work and results achieved in the various G20 work streams–employment, trade and investment, in particular–has provided the essential “building blocks”. In all of these areas, the OECD has made decisive contributions.
We “crunched the numbers” to make a robust, evidence-based case for reducing the gender gap in female labour market participation by 25% by 2025: our estimates show that this would lift productivity by reaping the full potential of women’s impressive educational achievements, qualifications and skills of recent decades and yield an additional 1.2% to 1.6% output growth over the period. This “25 x 25” strategic objective was endorsed by labour and employment ministers at their meeting in Melbourne in September, and G20 leaders will most probably follow suit in Brisbane.
Our approach to trade, through the lens of global value chains, resulted in a discussion on a better understanding of international trade dynamics and influenced G20 policy exchanges in this area. We will continue to explore and deepen our analysis of how countries can make best use of theses changing value chain patterns. Our contributions on long-term and infrastructure investment financing by institutional investors were also acknowledged and will constitute a major component of the agenda of the forthcoming Global Infrastructure Hub.
Last but not least, the OECD was a major force behind the quantum leap achieved in the realm of international taxation. Tax base erosion through aggressive tax planning and avoidance, as well as tax evasion, constitutes a serious risk, not only to public revenues but also to tax sovereignty and tax fairness in all G20 countries. It is fundamentally unfair and economically inefficient that citizens in the OECD pay an average top personal income tax rate of 43 %, while some multinationals pay as little as 1% or 2 %. G20/OECD outputs in those areas–the seven Base Erosion and Profit Shifting (BEPS) action points and the full Common Reporting Standard for Automatic Exchange of Information–will represent major deliverables at the Brisbane summit and a key contribution to the economic resilience agenda, alongside our work in these areas with developing countries, as well as on food security.
Excellence and policy relevance
The reliance of the Australian presidency on our contributions was once again testimony to the technical excellence and policy relevance of OECD work, and to the dedication, availability and responsiveness of its staff and experts. I would also like to pay a glowing tribute to former Deputy Secretary-General Pier Carlo Padoan for his leading role, since 2009, as our G20 finance deputy and chief economist and thank Deputy Secretary-General Rintaro Tamaki for taking over with talent and dedication when Pier Carlo Padoan was appointed Italy’s finance minister earlier this year. Let me also extend a warm welcome to our new chief economist, Catherine Mann, who will now take on this important job.
Let me finally express my personal appreciation for the remarkable progress achieved by a very dedicated, stout and forward-looking G20 Australia team, led by Heather Smith and Christopher Langman–a former ambassador to the OECD!–in the Sherpa Track and Barry Sterland in the Finance Track. The G20 Australia team has achieved great progress by emphasising the concrete measures that G20 countries must commit to in order to boost growth and jobs. The OECD is proud and honoured to have been a partner to Australia and to have contributed to significant policy changes and reforms that will benefit the entire world.
We look forward to putting our unique expertise and first-class policy analysis at Turkey’s disposal for its presidency and to inform and support its priorities–inclusive growth, development, SME development–and thus help the G20 to build a more prosperous global economy, and dynamic, inclusive societies.
© OECD Observer No 300, Q3 2014