G20 finance ministers and central bank governors meet (yet) again in Washington today under the chairmanship of Joe Hockey and Glenn Stevens. This meeting is not getting as much publicity in Australia as the meeting held in Sydney in late February.
Admittedly it is only seven weeks since the February G20 meeting and it is reasonable to ask 'so what's new?'. But it also demonstrates that most of the domestic press is not interested in the meeting itself but the fact that the financial heavyweights are in town. Moreover, recent research by ECB economists suggests that, as far as the markets are concerned, G20 meetings are much ado about nothing and while they may have some long-term payoff, they probably do not justify the media attention they sometimes receive.
All a bit harsh.
There will be some tricky items on the agenda for the Washington G20 Finance Ministers' meeting. Changed since February is the geo-political environment following Russia's annexation of Crimea. As we have noted previously, the Ukraine will cast a shadow over the G20 in 2014. The IMF's program for Ukraine will no doubt come up, although it is unlikely that the impact of the economic sanctions on the Russian economy will be openly discussed.
Another tricky issue will be the lack of progress on implementing reforms to IMF governance. At their meeting in February, G20 ministers said that ratifying the 2010 reforms to the IMF was their highest priority, and they urged the US to do so by the April meeting.
The US Congress has still not ratified the reforms, notwithstanding the Administration's attempt to link it to an aid package for Ukraine.
What will the G20 do now?
The Indian economic affairs secretary said this is perhaps the 'first visible failure of the G20' and there are reports that Russia and China are leading efforts to bypass the US. What they may be planning is not clear. But Treasurer Hockey will have to show leadership beyond continuing to urge Congress to pass the reforms. The G20 should focus on the performance of the IMF and assess what would change if the reforms were ratified.
A major topic will be progress in preparing reform blueprints to support the 'aim' endorsed at the February meeting to lift global growth by a further 2% over 5 years. Reports suggest the first 'sketches' of the reform agendas collected by G20 officials are not ambitious enough. One indicates that ministers will give a mandate to their officials to add new measures in order to reach 2%. If only it was so simple!
The required reforms are contentious and difficult and governments have to win domestic political battles for them to be implemented. For example, will Australian officials include an increase in the GST rate in Australia's growth plan? It will require much more than mandating officials to be more ambitious.
The Washington G20 meeting approaches the halfway mark in Australia's G20 presidency (it finishes at the end of November). A number of participants in the Think20 process (G20 think tanks), have provided a progress report on the Australian presidency.
The Prime Minister's aim for a focused leaders' agenda and short communiques is welcomed. But many note that Australia still has ten separate work streams and it is not clear which one or two items will be the focus of the Brisbane Summit. Australia has not added any items and has in fact dropped one — climate change.
On the 2% growth 'aim', this was seen as a positive initiative provided it leads to countries implementing new domestic economic reforms. But concern was expressed that the growth objective is vague, subject to different interpretations and hard to verify.
As to the priority to lift infrastructure investment, again the view in the report is that this will be an empty shell if it is not supported by concrete action. There was concern that an excessive focus is being placed on private sector financing and an appropriate balance has to be maintained between public and private infrastructure financing.
Many agree that trade should be a focus in 2014, although the Think20 report notes that Australia has not given much indication of what it wants to achieve. The view of Think20 is that the objective should be on strengthening the multilateral trading system and setting a strategic direction for the WTO to focus on implications of the growth in global value chains.
The G20's work on tax is endorsed in the report, although concerns are expressed over whether the OECD has the political clout to get international agreements. The G20 will have to provide that clout. There are also concerns over the ambiguous wording on financial regulation in the Sydney communique. Hopefully this will be cleared up. On development, the call is made for the G20 to provide leadership to the UN's post-2015 development goal process. And Australia has to improve the flow of information around the issues being progressed by the G20.
This is an interim assessment. It is still early days. But the Brisbane Summit will soon be on us. There remains cautious optimism among G20 members that Australia will achieve tangible results through the G20 in 2014. But this will require a lot more hard work and the direct involvement of the Prime Minister.