Remarks by Angel Gurría, OECD Secretary-General
Sydney, 21st February 2014
(As prepared for delivery)
Hon. Joe Hockey, Ladies and Gentlemen,
It is a great pleasure to present the 2014 issue of Going for Growth here in Sydney, as I did in Moscow last year, and in Mexico the year before. I would like to thank Treasurer Hockey for joining me today.
Going for Growth is the OECD’s flagship report on structural policies. It is where we identify and review progress on key priorities to achieve strong, sustainable and balanced growth in each OECD country, but also in partner countries so that it covers nearly all G20 countries. The purpose of Going for Growth is to help policymakers set reform agendas. Since the launch of the G20 Framework for strong, sustainable and balanced growth in 2009, this analysis has been used extensively in OECD and IMF contributions to the Mutual Assessment Process of the G20.
Going for Growth & steering away from the “low growth trap”
This new issue of Going for Growth comes at a time of transition for the global economy: we see the recovery strengthening in advanced economies, albeit at a different speed, while growth in emerging countries is slowing, also at different pace.
But our report recognizes and analyses one major concern shared by all : the risk of falling into a low-growth trap. The widespread deceleration in productivity in recent years is one reason to worry about this. Of course, productivity can move up and down with economic activity and has done so many times in the past. However, some key drivers of productivity growth – credit, investment and international trade – have been unusually weak since the crisis.
Another reason to take seriously the risk of a low-growth trap is the deep scars left in the economy by the crisis: increased long-term and structural unemployment; lower participation in labour markets, withdrawal from discouraged job-seekers and skills obsolescence; all of those developments have already reduced trend growth, at least in many advanced economies.
No doubt that in the next couple of days, lots of attention here will be given to the role of monetary and fiscal policies in supporting global demand most effectively. Stronger demand is indeed fundamental, but by no means sufficient to avoid the low-growth trap. For this, growth bottlenecks must be lifted everywhere. And, this calls for ambitious structural reform agendas to be pursued with determination by all G20 countries.
In that respect, the report I am releasing today is like a glass either half full or half empty.
The half full view: the pace of reforms remains on average well above the pace observed before the crisis, notably and unsurprisingly, in periphery countries of the euro area which have been most severely affected by the crisis. This is encouraging, considering the difficulty of reforming in a negative or low growth environment, where benefits take more time to materialise. In particular, our report points out considerable – and long-overdue - action to reform labour markets in countries hardest hit by the crisis.
The half empty view: the pace of reforms appears to have slowed somewhat over the past two years while the process of reform remains too often piecemeal and incremental and unlikely to fully address the underlying challenges.
Competition –which is the special feature of this report – is a perfect illustration of this: on the one hand, the progress some countries have made in the past five years in reducing regulatory barriers to competition in product markets shows that governments have continued to move towards a more competition-friendly regime. On the other hand, progress has been modest, except for a few cases. In particular, competition in services, both in advanced and emerging countries continues to be held back by regulatory barriers to entry. Yet, pursuing reforms in these areas is all the more important given the high growth and employment potential of the services sectors. In the case of peripheral euro area countries that I mentioned, their often ambitious labour market reforms have not been matched by more vigorous efforts to enhance competition in product markets that would have generated better job opportunities and increasing real incomes.
Let me conclude by saying that all countries have something to bring to the G20 table when it comes to structural reforms. Australia did well in the crisis but is facing slowing productivity gains while the level of productivity below OECD average. The emerging economies are confronted with widespread informality; uneven access to quality education and skills; strong inequalities and infrastructure bottlenecks. Good performers like Germany and Korea need to tackle fast population ageing and weak productivity in services.
So our message to G20 Finance Ministers tomorrow will be unambiguous: “go structural” to achieve strong, sustainable, balanced and inclusive growth! This publication is a blueprint, a country by country roadmap for G20 members to do just that: to design, promote and implement better structural policies for better lives.