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G20 summit finally gets some movement on reforms

Sydney: The world’s top economies have adopted a soft target of adding at least 2 percentage points to growth over five years, a source said, signalling optimism that the worst of crisis-era austerity was behind them.

The final communique from the two-day meeting of Group 20 finance ministers and central bankers in Sydney said they would aim to boost collective growth by “more than 2 per cent”, a G20 official said.

It included a pledge to take concrete action to increase investment and employment, among other reforms. The group accounts for around 85 per cent of the global economy. There was a nod to concerns by emerging nations that the Federal Reserve consider the impact of its policy tapering, with the communique saying central banks would be mindful of the effects on the global economy.

The G20 communique also stated that it “deeply regrets” that progress on giving emerging nations more say in the IMF had stalled, the source said. Major emerging powers including India, China, Brazil and Russia, have long lobbied for increased voting power in the IMF to reflect their growing share of the world economy, but the changes have been blocked by the US Congress.

The two-day meeting ended on Sunday with a round of news conferences by top officials, including European Central Bank president Mario Draghi and IMF managing director Christine Lagarde.

The growth plan borrows wholesale from an IMF paper prepared for the G20 meeting, which estimated that structural reforms would raise world growth by about 0.5 percentage points per year over the next five years, boosting global output by $2.25 trillion (Dh8.26 trillion). The IMF has forecast global growth of 3.75 per cent for this year and 4 per cent in 2015.

The target remains vague at the moment, with no road map on how nations intend to get there or repercussions if they never arrive. The aim was to come up with the goal now, then have each country develop an action plan and a growth strategy for delivery at a November summit of G20 leaders in Brisbane.

Agreeing on any goal is a step forward for the group that has failed in the past to agree on fiscal and current account targets. And it was a sea change from recent meetings where the debate was still on where their focus should lie: on growth or budget austerity.

It was also something of a feather in the cap of Australian Treasurer Joe Hockey, who spearheaded the push for growth in the face of some scepticism, notably from Germany. Australia is acting as president of the G20 this year, following Russia in 2013 and ahead of Turkey next year.