Today concludes the Cairns meeting of G20 Finance Ministers and Central Bank Governors.
This is our third meeting this year, and let me say it was marked by a strong spirit of cooperation, helped no doubt by the wonderful Cairns community and environment.
The main outcome from this meeting was the excellent progress we are making towards meeting our ambitious target from Sydney to lift global economic growth by 2 per cent over the next five years.
We have come a long way in a short period of time.
The IMF and OECD have looked at over 900 measures put forward by countries – of which 700 are new – and estimate our efforts could lift global GDP by 1.8 per cent through to 2018. Their analysis has been released.
We are 90 per cent of the way there to meet our 2 per cent goal. BUT there is more to do.
We showed a unanimous resolve to improve on this effort. Countries will be working right up to the Summit, and beyond, to bring forward additional measures, including policies to boost employment, boost trade, and improve investment conditions.
We are even more determined to press ahead with ambitious growth-enhancing structural reforms and actions to lift quality infrastructure.
While the world economy is recovering, growth is uneven and there are some obvious risks to the outlook. I am optimistic about what we can achieve if we work collaboratively.
It is critical that we take concrete steps to boost growth and create jobs. We will use all levers available, including additional fiscal and monetary policy leverage where appropriate.
We want to create the environment for private sector-led growth, and provide our citizens with more jobs and better living standards.
The detail of our individual growth strategies will be released in Brisbane and we are determined to hold each other to account for the commitments we’ve made. We will work with the IMF and OECD between now and Brisbane on plans to monitor implementation and build effective accountability mechanisms.
Global Infrastructure Initiative
As part of our new growth strategies, we have focussed on lifting investment in infrastructure because of its potential to address demand weakness. It is also a key driver for improving productivity.
We have now agreed to progress a multi-year Global Infrastructure Initiative. This initiative consists of an integrated set of actions to increase quality infrastructure investment across the G20 and beyond.
We have committed to develop a database of infrastructure projects to help match potential investors with projects.
We want to create a knowledge platform to build public sector expertise, and develop standardised documentation to reduce the costs of new investment.
The Initiative also involves country commitments to improve our domestic investment climates as this is the key to attracting private sector participation.
We have also agreed to a set of best practice documents to assist countries to promote and prioritise quality investment, and foster flows of long term institutional investment.
And we have agreed to support work to assist in the growth of new sources of finance for investment.
We are developing a mechanism to deliver this Global Infrastructure Initiative for the Brisbane Summit. While details are still being finalised, we are working towards an implementation plan that would see the creation of a Global Infrastructure Centre as the delivery mechanism.
We have worked closely with the business community on our investment agenda. It is fair to say that our engagement with the B20 and private sector investors has strongly influenced our thinking. We will continue our involvement with the private sector to deliver measures that make a real and positive difference for investment and job growth.
Macroeconomic cooperation
In addition to a strong focus on structural reform, the meeting discussed how macroeconomic policies can best support the growth outlook.
We agreed that monetary policy should continue to support the economic recovery, and that it should particularly address deflationary pressures where these are evident.
There was a strong focus on the need to carefully communicate potential monetary policy changes. In this regard, I want to particularly commend the Chair of the Federal Reserve, Janet Yellen, for the careful and deliberate way she has undertaken this difficult task.
Ministers and Central Bank Governors are all too aware of the potential for a build‑up in financial risks arising from prolonged, low interest rates.
All are committed to closely monitoring these risks and building even stronger economic policy frameworks, which are the ultimate defence against the damaging impact of renewed financial market volatility.
But we need to take pressure off monetary policy. Structural reform is one way to do this. Being smarter about the composition of government spending and taxation is another way.
By lifting the quality of Budgets we can help growth while maintaining responsible fiscal strategies and controlling public debt.
There was also recognition that, where appropriate, further fiscal initiatives may be necessary in the short term to support global growth. Any initiatives in this regard should not compromise plans for longer term fiscal consolidation.
Cutting down on tax evasion and avoidance
Let me now turn to the international tax agenda.
This is an ambitious agenda. But it is an ambition that is being delivered.
We are unified in our mission to modernise global tax rules and close gaps that have emerged in recent years.
As the Secretary General of the OECD, Angel Gurria has noted; the G20 has provided very serious political support to efforts to restore a sense of fairness and integrity in our tax system.
We welcomed significant progress achieved to date on the 2-year G20/OECD BEPS Action Plan, with roughly half the actions delivered this year as promised. This is an extraordinary effort and I congratulate the OECD and the G20 membership.
This work is structural reform at a global level.
It will bring international tax rules into the 21st century and ensure they keep up with changing multinational business models.
We have endorsed far‑reaching initiatives which will arm our tax authorities with the information that they need to identify tax evaders through the automatic exchange of information using a Common Reporting Standard (CRS).
We agreed to begin exchanging information through use of the CRS commencing from 2017. This will send a strong deterrence message to tax cheats with immediate effect. We are urging other jurisdictions, particularly financial centres, to match our commitment.
For the first time the G20 has supported further cooperation between our tax authorities on their compliance activities, and I look forward to further concrete progress in this space by the Brisbane Summit. As Chris Jordan, Australia’s Taxation Commissioner has noted – coordination by our tax authorities is a key element in enforcing compliance and identifying tax risks.
The G20 will continue to work with developing countries to ensure that they benefit from our tax agenda. Tax evasion and avoidance is a global problem and the effects are sometimes felt hardest by the poorest countries.
Improving the safety of the global financial system
Our work on financial regulation has been central to future-proofing our system against shocks. From the start of the Australian presidency we set an ambitious goal to substantially complete the policy response to the fault lines laid bare by the global financial crisis.
I am pleased to say we have largely succeeded in this task.
As a result of policy action our financial institutions are more resilient and less likely to wreak damage on our economies and citizens through costly failures. They have more and better capital, and have more defences against liquidity pressures.
We have made substantial progress in addressing the problem of institutions that are ‘too‑big‑to‑fail’. In a major step forward, the FSB will release a proposal for additional buffers for global banks to draw on in the event of failure. This is aimed at further protecting taxpayers if a large global bank were to run into difficulty.
We have also made substantial progress on addressing concerns regarding the shadow banking sector.
Lastly we have reinforced our commitment to reduce systemic risks and increase transparency in markets for complex derivative products.
As Mark Carney said, the Leaders meeting in Brisbane will be the turning point for shifting our focus from designing standards after the crisis, to responding to future risks where they emerge.
Engagement
We began our formal G20 meeting with a session involving our G20 engagement groups. This was an opportunity for us to hear from influential business, labour and civil society leaders on how the G20 can continue to best serve the interests of our citizens. This was the first time that we have brought together the G20’s engagement groups with Finance Ministers and Central Bank Governors.
I can assure these stakeholders that their views were taken into the G20 meeting and had an impact on our decisions.
Conclusion
In conclusion, this was a very successful meeting.
At the beginning of the year there was no global growth target, no global infrastructure initiative, financial sector reform was slow and the tax integrity program was in its infancy.
As of today we have committed to over 900 policy initiatives that help to make the economy around $2 trillion larger within 4 years. This represents millions of jobs. I emphasise there is more to do.
As of today we are 90% of the way to reaching our 2 per cent goal for additional global growth.
As of today we have embraced a once-in-a-century opportunity to reform the international tax system.
As of today we have forged ahead on key areas of reform of the global financial system.
And as of today we have launched a global infrastructure initiative to work with business and remove key barriers to more investment in infrastructure.
By the time of the Brisbane G20 Leaders’ Summit in November we will deliver real, concrete outcomes based on ambitious goals laid down in Sydney.