World risks era of slow growth, high unemployment: OECD
Monday, 24 February 2014 00:00
Reuters: Sweeping reforms are urgently needed to boost productivity and lower barriers to trade if the world is to avoid a new era of slow growth and stubbornly high unemployment, the OECD warned on Friday.
In its 2014 study on ‘Going for Growth,’ the Organisation for Economic Co-operation and Development said momentum on reforms had slowed in the aftermath of the global financial crisis, with much of it now piecemeal and incremental.
The report echoed Australia’s attempt to push an agenda for growth as it hosts finance ministers and central bank chiefs from the Group of 20 major economies in Sydney this weekend.
Australian Treasurer Joe Hockey has been pressing for the adoption of a formal global growth target which would be more ambitious than the International Monetary Fund’s current forecast for 2014 of 3.7%.
“The widespread deceleration in productivity since the crisis could presage the beginning of a new low-growth era,” warned Pier Carlo Padoan, Deputy Secretary-General and Chief Economist at the Paris-based OECD.
“These concerns, already prevalent among advanced OECD countries for some time, now encompass emerging-market economies and are fuelled also by high unemployment and falling labour force participation in many countries.”
Padoan highlighted a range of problems from a slowdown in global trade to lacklustre business investment and persistently high levels of unemployment in many countries.
Recommended remedies included reductions in regulatory barriers to competition, greater openness to foreign trade and investment and shifts in taxation from labour towards consumption, property and inheritance.
Different countries faced different challenges. Those with an ageing population, such as Germany, Japan and South Korea, needed to expand participation, in part by attracting more women to the workforce.
For the UK, Australia, Canada and the United States, problems included low productivity and high healthcare costs, Among the recommended reforms were improved access to education and lifting barriers to foreign investment.
Many emerging market countries needed to improve access to quality education, ease physical and legal infrastructure bottlenecks, and bring more workers into formal employment and out of the black economy.
The task was all the more urgent, said the OECD, as emerging markets were vulnerable to the eventual normalisation of monetary policies by the major central banks.
Steps by the US Federal Reserve to scale back its asset-buying program had already caused bouts of extreme stress in some emerging markets as foreign funds went seeking better returns in the developed world.
Fed Chair Janet Yellen is likely to hear plenty of those concerns as she attends the G20 meeting this weekend.