Subscribe

Traffic jams – physical and regulatory – gridlock growth and jobs

Around 400 business people from around the globe will converge on Sydney tomorrow for the opening of the B20 with one goal in mind: improve economic growth.

While a noble goal, I’m acutely aware that for many people it’s yet another meeting of the senior business people and I know some people will think the main focus will be on economic growth that just helps big business. After all, how can a meeting like this actually help families and those struggling to make ends meet in the growth corridors of places like Sydney or Melbourne? 

However, I’m confident the B20 meetings are different and the outcomes will be meaningful to everyone. The B20 was originally established back in 2010 as a way for business to produce policy recommendations for the annual meeting of the Group political leaders from the 20 largest economies in the world (G20). Essentially, this means business is providing governments with advice on how policies impact their ability to grow and create new jobs. 

That is the primary concern of those attending the B20 this week. How do we lift growth, boost work force participation and create new jobs? How do we build the resilience of the global economy so we can hopefully reduce the risk of catastrophic economic events like the recent global financial crisis? 

The G20 finance ministers met in February this year and decided to set a firm goal: lift economic growth by 2 per cent more than was already forecast. While this may sound simple enough, to put it in dollar terms, it would add more than $2 trillion and millions of jobs around the world. 

Our job at the B20 is to provide advice from a business perspective to government ministers on how to make this happen. We share the desire for growth, not for its own sake but for the jobs and opportunity and incomes such growth creates – for all of us. 

Take for instance improving infrastructure. Those already battling the daily grind of long commutes on roads and public transport systems not designed to carry the packed masses using them know first-hand the pain of sub-standard infrastructure.

Click image to zoom Tap image to zoom

Not everyone thinks in terms of productivity but time wasted commuting is simply wasted effort. 

Compounding the problem are cumbersome global rules that make it too hard for large superannuation funds and insurance companies to invest in important infrastructure projects that will improve the way our cities work – even when they want to. 

If we can make it easier for these funds to invest in these projects it will not only provide a tangible benefit for those living outside the immediate surrounds of the city, it will also significantly improve the productivity of our country. 

Our calculations suggest that if we get the policy settings right, we could add more than a trillion dollars each year to global GDP, as well as 30 million new jobs. Given Australia’s status as a premier producer of natural resources, we would also hope our country could earn more than our fair share of this prize in a similar way to how we have benefited from China’s rise. 

Another key recommendation we will be taking to Government will be to ensure that new global rules in response to the financial crisis – which we support in spirit - do not make it harder in practice for small businesses to grow and develop. 

While regulation is essential in ensuring the safety and stability of the global economy, it’s important we don’t keep imposing more new rules without fully understanding the impact of current rules that are yet to be fully implemented. 

Uncoordinated regulation, too much red tape, can limit the ability of economies to grow. 

Access to capital is of particular concern to many small and medium size companies. We know small and medium-sized enterprise create around 80 – 90 per cent of new jobs, so it’s vital we are able to support their growth and reduce any limitations that impact on a bank’s ability to lend to small business. 

Some of the measures we are recommending include taking a more complete view of the company seeking additional funding, as well as reducing the amount of additional money banks are required by regulators to hold to support their loans to SMEs. The more regulatory capital banks must hold, the less available to lend so getting the balance right is crucial. 

While these are just some of the measures we will be discussing, when you see news reports of a business leaders meeting to ‘improve global growth’, I hope this goes some way to explaining what we have been doing and why it is so important for all of us.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

editor's picks