8 October 2014
Speech - #2014019, 2014

Keynote Address, ‘The path to Brisbane – Setting up the G20 to make a difference’, Washington DC

Check against delivery

Introduction

Thank you Matt and thank you for the invitation to speak.

The CSIS is held in the highest esteem and that's no surprise: you're ranked the number one think tank in the world for security and international affairs.

I would also like to congratulate you on re-locating to your new headquarters just over two weeks ago. It's an impressive venue!

My address to you comes in the lead-up to the fourth and final G20 Finance Ministers and Central Bank Governors Meeting under Australia's presidency.

When we came to Government in September last year, we thought carefully about how to run the G20. We knew we needed to address both the nature of the meetings and their substance.

On the former, we wanted to lift the focus of Leaders, Ministers and Governors to the things that only they could drive and influence.

To do that, we wanted to create opportunities for them to have frank discussions on the practical delivery of reforms.

After all, no decisions are implementable unless we are able to take our communities and our parliaments with us on the journey.

In relation to policy substance we recognised that the G20 is at a crossroad. That's why we laid down four vital, but achievable, criteria.

First, the G20 needs concrete, practical outcomes that withstand the annual change in chairmanship.

Second, those outcomes have to be well communicated by political leaders.

Third, the outcomes have to be an integral part of a broader, enduring economic narrative.

And fourth, we decided it was important to raise the cost of failure – to make clear to G20 members that the world was watching and judging us on the implementation of our decisions.

Today, I'd like to give you an overview of what the G20 agenda has achieved to date against these four criteria.

I'll also outline the path to the Brisbane Leaders' Summit.

What we have achieved to date

When I was sworn in as Australian Treasurer in September last year, it was obvious that the challenge ahead would be to maintain the G20's sense of purpose and direction.

To re-invigorate the group, the agenda had to focus on achieving outcomes and uniting around an ambitious but deliverable target.

We determined that Australia's G20 year would focus on improving economic growth. This was particularly important given the frequency of downward revisions in growth forecasts by the IMF in the wake of the Global Financial Crisis.

Before our first meeting in Sydney, we promised to be good stewards of the institution by maintaining the G20's relevance and keeping a steadfast, global focus – no matter what the challenges of the time.

With that promise in mind, we identified how our success as G20 President would be defined.

We could claim success if we achieved a number of practical actions.

Firstly, we needed to deliver policies that lift growth and create jobs.

Secondly, we wanted a more robust and trustworthy financial system that supports that growth objective.

Finally, we wanted to deliver on the commitments made at St Petersburg, to a fair and effective international tax framework that rebuilds community trust in the global taxation system.

There are several layers to this plan, so let me expand on each initiative.

First, we are on track to deliver practical actions to lift growth and create jobs.

In February, Finance Ministers and Governors agreed to the Sydney Declaration, which sets out to lift our collective GDP by more than 2 per cent over the next five years, through new structural reforms driven by individual governments.

This was a first for the G20. There had always been words to reflect ambition but never numbers, let alone a target.

By Cairns, G20 member countries had put forward over 900 measures.

The IMF and OECD estimated that our efforts could lift global GDP by 1.8 per cent over five years, relative to the pre-existing growth profile. It could deliver an additional $2 trillion to the world economy and millions of new jobs.

So we are 90 per cent of the way there. That's why we will intensify our efforts to find the final 10 per cent before the Brisbane Summit in November.

In Brisbane, members will present their new policy actions to lift growth. With these actions, we will lay down a credible policy monitoring process involving the IMF and OECD.

This will constitute the Brisbane Action Plan.

In developing the growth strategies, members have in particular focused on lifting investment in infrastructure because it can address demand weakness and improve productivity.

In Sydney, we thought carefully about initiatives that lift infrastructure investment, with an emphasis on fostering more private sector involvement.

Some months later in Cairns, we agreed to a Global Infrastructure Initiative, which is about increasing quality infrastructure not just among the G20 membership but across the world.

The Initiative includes members' individual commitments to improve domestic investment climates, as well as collective actions to facilitate the development of infrastructure as an asset class, improve project planning and preparation, and reduce information asymmetries.

We committed to developing a database of infrastructure projects to help match potential investors with projects.

We also want to create a knowledge platform that helps to build public sector expertise and develop standardised documentation that reduces the costs of new investment.

We agreed to a set of best practices to help countries promote and prioritise quality investment, and foster flows of long-term institutional investment.

And we will support work to help grow new sources of finance for investment.

In Brisbane next month, we hope to announce a mechanism that will help us deliver this important, multi year initiative: the Global Infrastructure Centre.

This Centre can bring together in a single hub, governments, international organisations and the private sector, to facilitate a knowledge and information platform – for new infrastructure, or upgraded infrastructure, across developed and emerging economies.

The Centre already has the strong support of the international business community, including the B20.

In fact, the B20 estimates that establishing a global infrastructure hub could help facilitate tens of billions of dollars of annual infrastructure investment.

It's clear that with the cost of capital at record lows, the time is right for action on infrastructure investment.

Second, we are on track to completing key elements of the policy response to the financial system weaknesses exposed by the global financial crisis.

In Sydney, we pledged to complete as much of the financial regulation agenda as possible. Policy uncertainty in this area began to impede key drivers of growth across financial services.

And, from our discussion in Cairns, it's clear we've made great strides in delivering stability and certainty.

Globally, banks will have more and better-quality capital, as well as better defences against liquidity pressures.

We made substantial progress in addressing the problem of institutions that are 'too big to fail'.

As part of this work, the Financial Stability Board, under the steadfast and impressive leadership of Mark Carney, will soon release a proposal for additional loss-absorbing capacity for global banks.

This will further protect taxpayer funds if large, global banks run into difficulty.

That's an extremely important issue. It and the FSB proposal have now been largely resolved.

I pay tribute to central bank governors and regulators, who have not only worked incredibly hard this year to deliver these outcomes, but have been prepared to make some compromises to bring about great benefit for all.

In addition to the rules governing bank failure, we have also made substantial progress on concerns about the shadow banking sector.

And, lastly, we have reinforced our commitment to reducing systemic risks and increasing transparency in markets for complex derivative products.

These reforms will deliver a safer financial system that supports and facilitates greater economic growth.

As a result, our citizens will have confidence in the stability of the global financial system and industry will have the confidence to invest.

Ladies and gentlemen, Brisbane will mark a turning point for international financial regulation.

It is time to draw a line in the sand on the Global Financial Crisis.

Let's move on.

From the time of the Leaders meeting onwards, we will look forward, not backwards; neither fighting old wars nor re-prosecuting old agendas.

With key elements of the financial reform agenda substantially completed, our focus will shift to implementation. Policy uncertainty must be removed.

We want the financial regulation architecture to be set up quickly for the next phase of global growth, so it can pick up emerging issues, as well as balance stability with risk-taking.

This will be supported by the changes initiated by the FSB, including a review of its representation, and an annual report on the implementation and impact of reforms.

Third, we are on track to deliver a fair and effective international tax framework.

In 2013 at St Petersburg, members unanimously agreed to a 15-point Base Erosion and Profit-Shifting (or BEPS) Action Plan, to be completed by the end of 2015.

The two-year action plan will not only help secure revenue bases, it will bring international tax rules into the twenty-first century and ensure they keep up with the changing business models of multi-national companies.

In Sydney, we expressed our continued full support with G20, and non-OECD countries all involved in the project on an equal footing.

In Cairns, we welcomed progress made on the action items delivered this year.

Seven of the fifteen proposals have been presented by the OECD. The remainder will be presented in Turkey next year.

Sure, there's still much work to do between now and the end of next year. But the progress we have made is extraordinary and members are resolute about completing this complex agenda in 2015 as agreed.

The G20 is also working to improve taxation liability transparency. We are determined to crack down on global tax evasion.

Over the last few months we have endorsed the Common Reporting Standard on the automatic exchange of tax information. In Cairns, we made a strong commitment to implementing it rapidly and called on outlying financial centres to do the same.

This will give our tax authorities the information they need to identify and deal with tax cheats.

Let me be very clear, a tax cheat is a thief. I want to assure you that Finance Ministers are very determined to use all available resources to ensure that loopholes to facilitate tax cheats are closed.

And, to complement our policy work, the G20 has, for the first time, supported cooperation among our tax authorities on compliance activities, which will be a key element in enforcing compliance and identifying tax risks.

Tax avoidance and evasion are issues for everyone. That's why, this year, we also agreed to practical steps to help developing countries address base erosion and exchange tax information, including by facilitating the work of tax inspectors "without borders".

Lastly, we have improved the overall effectiveness of the G20 – and we have done it in a number of different ways.

One was by changing the nature of discussion.

The G20 is well-placed to be the pre-eminent global economic policy making body.

The right people are in the room, but the question is – are they having the right discussions?

It seemed to me there was significant fatigue within the G20, which no doubt stemmed from six years of addressing challenging economic circumstances and dealing with an agenda that expanded considerably during that time.

So we chose to focus our efforts on getting global growth back on track and creating new jobs.

We resisted putting new items on the agenda and focused on the issues the G20 had been debating for some time, but had failed to finally resolve.

As such, we tried to direct ministerial discussions to where they were most needed, that is, towards agreement on key policy issues or cutting through roadblocks to growth.

Members had in-depth discussions on macroeconomic cooperation and structural reform.

We shifted the culture of the G20 by transforming it from a reactive institution into a more proactive, forward looking one.

In Sydney, we adopted practical changes to the meeting formats so they would engender genuine discussion.

We also looked to build stronger relationships among members because, if we were to work together more effectively, Ministers needed to know each other at a more personal level.

This is important for the G20 because its strength comes from the familiarity of its members and their ability to leverage relationships.

Better internal communication facilitates better external communication.

It was clear to all that the G20's public messaging simply had to improve. Our actions had to be understood and resonate with all members of the community – not just the technocrats.

So we've worked really hard to convey our outcomes in short, non-technical documents that are easily understood.

We have also worked hard on our relationships with key stakeholders, including business and community representatives.

This goes beyond traditional discussions to more meaningful engagement on the agenda. For example, we facilitated early engagement in Sydney on the infrastructure agenda with business representatives. This has resulted in the B20 undertaking considerable support work for our Global Infrastructure Initiative.

We also worked closely with business throughout the year on our growth and financial regulation agendas.

Needless to say, the expertise, insights and ideas of the business community have helped shape our vision for the G20 and ensured our policies make a real and positive difference for global growth and resilience.

And, for the first time at a formal G20 meeting, we brought together the G20's official engagement groups, such as the L20 representing labour, the Y20 representing youth, the C20 representing community, and the T20 representing "think tanks". They all formally met with Finance Ministers and Central Bank Governors in Cairns.

The importance of maintaining political momentum and delivering

As significant as all of this is, the agreements we have reached on ambitious reforms are only half the job.

The next step is implementation – that's important not just for the G20's credibility, it's crucial in addressing the real challenges to the global economy.

In the past, the G20's credibility has been called into question because members didn't always deliver on their commitments.

This has been largely attributed to the growing scope of the agenda.

As the G20 Presidency passes from one member to the next, its agenda continues to expand, and the list of legacy issues inherited by each new President gets longer every year.

This poses a risk because it can distract from more important issues affecting the global economy.

This year, we tried to remedy these issues.

We concentrated the agenda on lifting global growth and shoring up resilience, and we worked hard to build consensus among members on these priorities.

It's now up to governments to deliver on their commitments – or bear the cost of failure.

We need to show the world that the G20 can do more than agree to meaningful reforms – it can actually deliver them.

We've done the talking; now we need the actions.

We need to implement, and we must be accountable.

Our Sydney declaration had a five-year horizon. That's because we are tackling some fundamental challenges and that can take time.

And through peer review of our growth strategies we will keep each other honest.

Of course, as policymakers, we know that many things are sometimes out of our control.

If we have to, we must be prepared to commit to further reforms should macroeconomic conditions warrant it.

We will draw on international organisations where their input can offer guidance on the impact – or gaps – of our policies.

We will work with the IMF and OECD on plans to monitor implementation and build effective accountability mechanisms.

The motivation behind the Sydney declaration is something that will keep driving us forward each year.

Conclusion

The G20's achievements this year have been considerable.

The nations that sit around the G20 table can honestly say "we made a contribution".

Given that we have Leaders of 85 per cent of the world's economy sitting at the table, it is timely to recognise that our deliberations can make a significant difference.

To my colleagues and the many who support our work, I say thank you.

Whilst our Presidency may end in December, our efforts in support of the G20s work will not diminish.

There is still much work to be done to stimulate growth, to facilitate job creation, and to build infrastructure that delivers enduring prosperity for all our communities.

Thank you.