G-20 host Australia urges central banks to avoid ‘surprises’

SYDNEY –– Australia on Saturday called for better advance notice of policy changes by central banks to avoid shockwaves for emerging economies, at a meeting of G-20 finance ministers where rifts over US monetary policy loomed large.

Australian Treasurer Joe Hockey said he wants the summit to stay focused on ways to stimulate growth and create jobs in the aftermath of the 2008 financial crisis, adding he was confident of tangible results.

“I must say there is tremendous goodwill in all the meetings I have attended,” he told reporters just before Saturday’s meetings in Sydney.

But the fallout being felt by some emerging economies, which have suffered sharp capital outflows and losses to their currencies they blame on the Federal Reserve easing back its mammoth stimulus programme, remains a lightning rod issue.

Countries led by Indonesia and South Africa, which is not attending the Sydney meeting, along with Mexico and Brazil have called on the US to provide more clarity on its wind-back and better communication to subdue the impacts on emerging markets.

Speaking Friday, US Treasury chief Jacob Lew said he was monitoring global volatility and was encouraged that some economies had taken action to get their houses in order.

“We’re seeing a substantial differentiation in the marketplace in the economies that have made those decisions and in the economies that haven’t,” he said.

“Emerging markets need to take steps of their own to get their fiscal house in order and put structural reforms in place.” 

‘Reasonable warning’ 

Hockey agrees that countries must make their own reforms to bolster their economies, but said central banks in the world’s most advanced nations should give each other better notice of policy changes to avoid market turbulence. 

“I think if there is a policy of no surprises in relation to monetary policy activity and that central banks around the world have reasonable warning of what may be events that create market volatility, I think that’s not unreasonable,” he said.

“I think that’s what central bank governors are aiming for.”

Bilateral meetings were held Saturday morning ahead of a session on the global economy in which delegates discussed the latest reports from the Organisation for Economic Co-operation and Development (OECD), International Monetary Fund (IMF) and World Bank.

The OECD warned Friday that declining global productivity would usher in a new and extended era of low growth unless reforms are accelerated.

These include freeing up labour markets, encouraging infrastructure investment and undertaking the structural reforms needed to boost domestic demand.

Hockey has been pushing his fellow ministers to agree to faster global growth targets, and a draft of the communique due to be issued Sunday, cited by Bloomberg, said they would agree on “concrete measures” to achieve this.

It said collective gross domestic product could be raised by “at least 2 per cent” above current projections over the next five years.

This could not be confirmed, but a G-20 official said ministers were likely to adopt a global growth goal, although targets for individual countries are not expected.

OECD data released Thursday showed growth in advanced economies slowed down slightly in 2013 to 1.3 per cent from 1.5 per cent in 2012.

Hockey said he was confident the meeting would provide results.

“All the finance ministers and central bank governors I have spoken to understand that whilst the globe is facing some challenges, that there is some level of international market volatility,” he said.

“Through greater cooperation, realistic goals, and importantly a tangible process for achieving those goals, we can have very real outcomes this weekend.”

But he admitted that some of his counterparts –– notably Germany –– were reluctant to put their names to a global economic growth target.

“I understand that there is some reluctance from some to have a goal or a target or an ambition, but we need to reach high to deliver more,” he said.

“There needs to be a tangible plan presented by each jurisdiction that helps to achieve our collective goal. “