SYDNEY-The G20 meetings of the world’s top finance ministers and central bankers in Sydney Feb 22-23, are likely to be feisty, a clash of old world and new world orders posing a diplomatic challenge for hosts Australia.
The Group of 20 advanced and emerging economies,(19 countries plus the European Union), have held finance meetings as far back as 1999, but the group was elevated to leadership level in 2008 in response to the Global Financial Crisis.
The G20 leadership meetings will be held in Brisbane in November but the finance meetings this week will set the tone says the Australian National University’s, Dr Susan Harris Rimmer, an expert in diplomacy and the G20.
“Out of this finance meeting I am looking for some more concrete direction for the leaders’ summit,” she said in a phone interview.
Among the global financial elite gathering in Sydney will be Christine Lagarde, head of the International Monetary Fund (IMF); Mark Carney, the Bank of England governor; German Finance Minister Wolfgang Schaeuble and Bundesbank President Jens Weidmann.
U.S. Treasury Secretary Jacob ‘Jack’ Lew, and Chair of the Board of Governors of the Federal Reserve System, Janet Yellen, will also be in attendance, the latter in her first international forum since she took office, February 4.
“We do need this meeting to make a splash and it will be because it is Janet Yellen’s first big G20 outing and everyone will be watching,” said Dr Harris Rimmer.
The United States are likely to face a “trifecta of concerns” she said, the biggest issue the decision to “taper” or reduce the flow of US dollars that the U.S. Federal Reserve has been pumping into the system. The cut back has effected currencies world wide, including Australia, and has particularly annoyed emerging economies, India and China.
The failure of the U.S. Congress to approve reforms to the IMF and the lack of movement in reducing corporate tax evasion, particularly in regards to companies like Google and Ebay, are also likely to be raised.
“All three issues are going to put the U.S. under pressure,” said Dr Harris Rimmer.
In a pre-G20 briefing in Washington earlier this week, the U.S. fired its own salvo, reigniting the debate over currency wars and calling for a “robust discussion” on global imbalances. In a slant at big exporter, China, a Treasury official called on countries with “current-account surpluses” to focus on domestic growth and refrain from competitive currency devaluation, Bloomberg news reported.
Old versus new world
The G20 meetings will highlight an increasing clash of divergent views as domestic concerns bump up against global, and emerging economies clash with the developed world.
While it cannot be assumed that central banks will act against their domestic interests, ‘spill over’ effects are inevitable particularly from big banks like the US Federal Reserve, which helped bail out European banks.
“When central banks make decisions now they effect the rest of us and that makes the G20 even more important,” said Dr Harris Rimmer.
The interlinking of economies also highlights the importance of communication and transparency, areas which are also destined for discussion.
Australia’s position in the Asia Pacific region makes its role as G20 chair particularly pertinent, says Domenico Lombardi, Director of the Global Economy Program at Canada’s Centre for International Governance Innovation.
“Unlike many other members of the G20, Australia can effectively work as a broker between advanced and emerging economies, especially those from Asia, which is at the heart of the G20’s nature,” he said in a statement.
Lombardi highlighted reform of international financial architecture as an area likely to receive attention.
How effective Australia will be remains to be seen. With a change of government in September last year, newly elected Prime Minister Tony Abbott and Treasurer Joe Hockey have yet to prove their mettle on the international stage.
Abbott’s address in Davos in December 2013 was well received by the business community but was also criticised for airing domestic political concerns. Joe Hockey too has made it clear he will focus on growth, jobs and infrastructure at the G20 meetings but it remains unclear how that will manifest.
While she hopes for “a more nuanced and global leadership,” perspective from Abbott and Hockey, Dr Harris Rimmer remains positive saying both politicians are “down to earth” and are likely to focus on a simple but clear agenda.
“Back to basics is not a bad thing,” she said.
Australia has long been a supporter of the G20 and after seven years as the head of the Reserve Bank of Australia, RBA governor, Glenn Stevens, has spent much time on G20 issues and is well equipped to deal with the cut and thrust of the coming meetings.
In a rare address on the G20, given to the Australian Securities and Investments Commission (ASIC) Annual Forum in March last year, Stevens made clear his understanding and intent.
As a “global citizen’ Australia has responsibilities he said: “The responsibilities are to uphold and play by the rules that are globally agreed, which include implementing global standards in regulation and oversight, and encouraging others to do so.“
Stevens emphasised that the end goal of the G20 was to have a “stable, more resilient and simpler financial system,” with built in flexibility and resilience, much of which had already been set in motion. The challenge now, he said, was to implement agreed reforms and avoid distractions.
“The G20 should be looking for careful and sustained efforts at implementation of the regulatory reforms that have already been broadly agreed, but being wary of adding further reforms to the work program,” he said.
In a hint of the difficulties ahead, Stevens added, “Lest this be considered too weak a position, let us remember how much is being attempted.”