Remarks by Angel Gurría, OECD Secretary-General, delivered at the G-20 Finance Ministers and Central Banks Governors’ Meeting
Cairns, Australia, 20 Septembre 2014
(As prepared for delivery)
The G-20 made an impressive commitment at Sydney: to lift its GDP by more than 2% over the coming 5 years and to create millions of additional jobs.
More than that, countries committed to working – together - to raise the level of ambition of monetary, fiscal, financial and structural policy actions.
The OECD’s Interim Economic Outlook - published last Monday – shows some downward revision in growth for most major economies and many significant challenges remain for the recovery.
The global economy is continuing to expand at a moderate and uneven pace. The tepid rate of growth means that a substantial degree of labour market slack remains, especially in the euro area, and world trade growth remains sluggish. The risk of the so-called ‘secular stagnation’ makes progress in reforms even more vital.
Today, I will report to you on the OECD’s assessment, working with the IMF, of progress towards the 2% objective and – more importantly – the wider goal of achieving stronger, more sustainable and balanced inclusive growth for our citizens.
The OECD has identified more than 980 structural reform commitments made by G20 members in their revised Growth Strategies.
Close to 200 commitments have been added since June. This includes a number of significant new announcements, including Japan’s new economic policy packages in June, reductions of labour costs in France and removing barriers to FDI in India. These are very meaningful reforms.
Many countries have committed to significant reforms that will reduce unemployment, raise labour market participation, remove trade barriers, strengthen competition and encourage long-term investment.
Overall, the G‑20’s commitments on structural reform countries have made significant progress compared with earlier years. The comprehensive growth strategies improve peer review among members and transparency to the public, leading to great ambition.
Encouragingly, there is a growing overlap between what countries are doing and the five structural reforms priorities identified by the OECD in its Going for Growth exercise that I launched with Treasurer Hockey in Sydney in February. This includes innovation, competition, reforms in product and labour markets to strengthen productivity, but also measures to increase labour force participation and invest in peoples’ education and skills.
We note for example that Italy is undertaking reforms in all areas prioritised by the OECD, although they are getting some help with their homework from my friend – and the former Chief Economist of the OECD - Pier Carlo Padoan !
The OECD has been working with the IMF to assess how much progress has been made towards the 2% of GDP objective.
As I am sure you will appreciate, this is a massively difficult and challenging task. We have worked closely with G-20 members, collectively and individually. And we have been working hard to analyse and include supply and demand effects in our models. The result comes with caveats and uncertainties on both sides, but this is in the nature of the exercise.
Overall, we now estimate the impact of the Growth Strategies as raising GDP by 1.8 percent by 2018.
This is a significant step forward in strengthening global growth and creating jobs. It implies substantial gains in productivity, employment and wages.
However, it is also incomplete. The progress achieved so far leaves three big challenges.
First, the hard work to implement these commitments begins now. We have talked the talk, now it’s time to walk the walk. Many measures need to be legislated and then work begins on the ground. We will face many difficulties, both practical and political.
Second, the weak recovery and risks to the outlook mean that we need to stay vigilant to support demand and avoid inflation even as we undertake supply-side reforms.
Third, structural reform is not a list of measures with an end date. It is an on-going process to build more productive, inclusive and sustainable economies for your citizens. The German coach of the 1954 World Champion Soccer team used to say: “After the game is ahead of the game”’ which is also true for structural reforms. After the reform is ahead of the next! Reform must become a state of mind, a permanent process, rather than an event or a series of events.
Despite the progress made this year, there are plenty of opportunities around to make even more progress. For example, bringing more women into the labour force could create millions of additional jobs and raise growth potential. A more ambitious trade agenda would help to get the trade “engine” working again.
The G-20 will need to carry on in future years with even greater ambition to achieve such outcomes. So, we’re not there yet, but the beginning is promising. Let’s stay the course.