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Australian Treasurer Joe Hockey, who hosted the meeting, sold the plan as a new day for cooperation in the G20.
“We are putting a number to it for the first time – putting a real number to what we are trying to achieve,” Hockey told a news conference. “We want to add over $ 2 trillion more in economic activity and tens of millions of new jobs.”
The targeted acceleration would boost global output by more than the world’s eighth largest economy Russia produces in a year.
The deal was also something of a feather in the cap of Hockey, who spearheaded the push for growth in the face of some scepticism, notably from Germany.
“What growth rates can be achieved is a result of a very complicated process,” Germany’s Finance Minister Wolfgang Schaeuble said after the meeting.
“The results of this process cannot be guaranteed by politicians.”
Australia is acting as president of the G20 this year, following Russia in 2013 and ahead of Turkey next year.
While shifting the focus to reforms that would lift and sustain global growth in years to come the group acknowledged that monetary policy would need to “remain accommodative in many advanced economies and should normalise in due course.”
The growth plan borrows wholesale from an IMF paper prepared for the Sydney meeting, which estimated that structural reforms would raise world economic output by about 0.5% per year over the next five years, boosting global output by $ 2.25 trillion.
The IMF has forecast global growth of 3.75% for this year and 4% in 2015.
As yet there was 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.
“Each country will bring its own plan for economic growth,” said Hockey. “Each country has to do the heavy lifting.” 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.
Financial markets had been wary of the possibility of friction between advanced and emerging economies, but nothing suggested the meeting would cause ripples on Monday.
“The text of the communique indicates that the standard U.S. line that what is good for the core of the world economy is good for all seems to have won out,” said Huw McKay, a senior economist at Westpac, noting there was nothing that could be taken as “inflammatory” about recent volatility in markets.
There was a nod to concerns by emerging nations that the Federal Reserve consider the impact of its policy tapering, which has led to bouts of capital flight from some of the more vulnerable markets.
“All our central banks maintain their commitment that monetary policy settings will continue to be carefully calibrated and clearly communicated, in the context of ongoing exchange of information and being mindful of impacts on the global economy,” the communique read.
There was never much expectation the Fed would consider actually slowing the pace of tapering, but its emerging peers had at least hoped for more cooperation on policy.
Hockey said there had been honest discussions among members on the impact of tapering and that newly installed Fed Chair Janet Yellen was ‘hugely impressive’ when dealing with them.
The G20 also stated that it ‘deeply regrets’ that progress on giving emerging nations more say in the International Monetary Fund had stalled.
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 agreed in 2010 have been blocked by the US Congress.
The G20 urged the United States to ratify the reforms before the next meeting of policy makers in April.
The group is also progressing with plans to “make sure multinational companies pay their fair share,” said US Treasury Secretary Jack Lew.
Big budget deficits and revelations that companies such as Apple and Google use structures that lawmakers have labelled ‘contrived’ to avoid billions of dollars in taxes, have led to growing calls to close corporate tax loopholes. The companies say they follow the existing tax rules.
