11 Nov 2014
It’s also not going to be the usual week for those who have been involved with the B20 for the past 12 months. This weekend will see the culmination of a year’s hard work as business and government leaders come together to ratify a plan to improve global growth.
"To the Finance Ministers’ credit, there has already been significant progress in relation to five of the seven B20 recommendations."
I’ve been fortunate to lead the B20’s Financing Growth Taskforce. Our focus is developing practical measures to promote a more stable and efficient financial system. Such measures are essential if we hope to meet the G20’s stated aim of lifting global growth by an additional 2 per cent over the next five years.
The underlying policy theme of our recommendations is more needs to be done – by both business and government - to get global growth back to where we need it to be.
But for growth to occur, markets need certainty.
This certainty will come from ensuring that new regulation, introduced in response to the financial crisis, is implemented in a way that provides greater resilience to the global financial system, while also balancing the need for growth opportunities.
In developing our measures, we examined the impacts of regulation on overall credit creation – and hence on the financing of the real economy. We have seen real examples where well-meaning global rules have had an unintended impact on the provision of traditional finance by banks.
This is a real concern. When you choke off finance – for whatever reason – growth suffers. So after extensive consultation we recommended a course of action by global regulators that will go a long way in addressing these concerns. In effect, fix the problems.
This isn’t just an example of business talking to itself and we were pleased G20 Finance Ministers took action in September and adopted a number of the taskforce’s recommendations. In fact, to the Finance Ministers’ credit, there has already been significant progress in relation to five of the seven recommendations.
In particular, Ministers have endorsed the Taskforce’s calls for the Financial Stability Board to produce an annual report on the implementation of financial regulatory reforms and their effects. While this may not seem like a major outcome, it is a rare example of a global regulatory body committing to charting the actual impact, positive or otherwise, its regulations are having on the real economy.
In another significant breakthrough, the FSB will now also consider the role and representation of emerging market economies as part of its membership review. This will result in more effective representation from emerging markets on the board and is a vital outcome for kick starting global growth.
The lack of representation of emerging markets was a significant oversight, leading to what is effectively financial exclusion of some of our nearest neighbours. While this may seem like a peripheral issue for Australia, given Asia’s increasing role in providing the extra horsepower for the global economy it’s not something we can ignore any longer.
Whether it is the burdening of emerging markets with cumbersome regulation designed to address issues isolated to developed markets or understanding the real impact global anti-money laundering rules are having given the immaturity of emerging market financial systems, these are issues that need be acknowledged and fixed.
So enjoy the light show and – if you are in Brisbane – the day off. But rest assured the delegates to the G20, business and government, recognise we can’t allow this to be just a sideshow. Growth in the global economy is the main game. Without it, both the emerging and developed world will continue to suffer poorer standards of living than we should hope for.
Photographer: Atmosphere Photography.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
11 Nov 2014
11 Nov 2014