Feb 24, 2014

Never mind growth goals, Hockey’s G20 performance is what counts

The growth forecasts of the weekend G20 meeting are unlikely to hold, but Joe Hockey's good performance is what matters for Australia anyway, Glenn Dyer and Bernard Keane write.

So, "centre-left movement" no longer: Treasurer Joe Hockey has evidently tempered his views after his first, and successful, performance on the international stage over the weekend. He hosted G20 finance ministers and central bankers and emerged claiming his plan for growth had triumphed. The group committed the world's largest economies to work to lift economic growth by more than 2% over five years, an outcome Hockey had worked for, backed by the International Monetary Fund. But political volatility will make that difficult to deliver. Growth targets and forecasts are usually not worth the paper wasted to project and justify them -- just ask the IMF. Its January update to its World Economic Outlook saw the first increase in the global growth target for more than a year (in fact for six such updates) -- after consistently getting its forecasts too high and having to revise them down. Or ask the Organisation for Economic Co-operation and Development, which last month admitted it had consistently missed the problems of the global economy in the past five years or so by underestimating the intensity of the eurozone crisis, among other key factors. Not that we're much better. The Reserve Bank of Australia has examined the accuracy of its own forecasts since the early 1990s and now warns those using them to be a bit more flexible. Likewise, the Australian Treasury has consistently overestimated the strength of the local economy for the past three years, especially the growth of government revenues and the impact of the strong dollar, and now tries to provide a range of forecasts levels. And the 2% growth commitment (on top of existing forecasts) -- or 0.4% a year for the global economy -- will last for this year alone, despite what Hockey might argue to the Australian political audience as he seeks to use the protection of the G20/IMF policy to justify the 2014-15 budget. Turkey is the G20 host in 2015; given the state of its economy (with deep political problems for the ever-more repressive government of Recep Erdogan), what's betting that country's policies are different to those of the developed economies' agenda pushed by Hockey, with the ammunition again provided by the IMF? Turkey, India, Brazil and China were reportedly among those countries critical of the US Federal Reserve and its "tapering" of its quantitative easing at the weekend meeting (and before it). With the Fed continuing to taper through the rest of 2014, emerging economies are going to continue to face volatility and pressures on their finances, current accounts and currencies. Turkey's leadership of the G20 therefore gives a major emerging economy the chance to push an entirely different line to that pushed by Hockey this year. And over the next five years, the following countries have scheduled elections which could involve a change of government or economic tack -- Brazil later this year, the United Kingdom next year, Australia in 2016, India this year, South Korea, Japan, the US (midterms this year, presidential and congressional in late 2016). France and Germany will have state elections, and then national elections (in 2017). Given the global economy had real GDP estimated at just on $US72 trillion in 2012, the 2%-plus growth target is very modest -- equal to just under US$400 billion a year of economic activity. The target is lower than the IMF's 2.5% -- suggested in a key paper for the summit that was tabled at the weekend meeting -- which would add up to US$50 billion a year more than the G20 agreed. The slow slide in Chinese economic growth, the looming GST change in Japan and the elections all have the potential to derail the G20 agreement, which in any event could simply produce a potpourri of measures with little or no cohesion. By the time finance ministers meet in Cairns in September ahead of the G20 summit in Brisbane in November, India will have a new government, while Brazil will just have held national elections at the start of October which could see a change of government, judging by the increasing political volatility in that country. At least the US will have ended its midterm congressional elections. Trade protectionism has erupted in the US among Democrats and Republicans alike (the Trans-Pacific Partnership, which the Coalition is tightly hanging on to despite the huge problems of its intellectual property chapter) is in danger of being abandoned. But the US reneged on boosting the finances of the IMF, after agreeing to it at the last couple of G20 meetings, and playing a major role in convincing other countries of the rightness of the recapitalisation moves. And the congressional elections in November will also signal the start of Barack Obama's lame duck status for 2015 and 2016. Still, his G20 performance is a positive addition to Hockey's so-far mixed record as Treasurer. To the extent that it strengthens his role within the government, that's a good thing domestically, regardless of what happens with international growth targets.

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14 thoughts on “Never mind growth goals, Hockey’s G20 performance is what counts

  1. MJPC

    The continuing averse effects of climate change will put paid to those growth forcasts. Uncle Joe would not factor that in being a denialist.
    On that matter, how can there be infinite growth of any percentage in a world with finite resources? Also, Uncle should have asked all of the collective guru’s which of them forcast the GFC the day before the big crunch; I bet not one of them! It’s all snake oil and BS for the capitalist world.

  2. mikehilliard

    [Market assessing the G20 growth objective as useless, meaningly and unreachable. Hot air swallowed by an easily plied few, but not the markets.]

    Hockey does hot air well.


    The left right paradigm is false and when it comes to monetary policy it is patently fraudulent.

    All the major banks of world are bankrupt. The total amount of derivatives owned by these banks is believed to be in excess of $US 1.2 quadrillion dollars. This will not end well.

    They intend to recapitalise by asset stripping in all western countries as they did using a ‘bail in’ prototype in Cyprus. In Australia the RBA has, on behalf of the big four banks, stitched up a $380 billion globally unique permanent bail out facility and it’s ready to go. The fact that this arrangement is taxpayer backed is well hidden from the punters.

    All this, government getting out of the way talk, in response to the demise of GM car manufacturing and SPC food processing is pure banker inspired propaganda. The financial media in this country with few exceptions are utterly despicable.

  4. zut alors

    MJPC has summed it up perfectly. It’s worth citing the GFC which went unheralded by almost all economists & financial boffins apart from a few notables like Joseph Stiglitz. But Stiglitz & Co were voices in the wilderness while recklessness prevailed.

    When small nations eventually begin to disappear below sea level the G20 will be hard pressed to come up with any meaningful numbers.

  5. K.D. Afford

    MORE.. you are so right. The failure of Hockey to see that we are at the end of growth shows how out of touch he is in finding a way forward, espousing eternal growth, no vision, no new measures, only never ending growth.
    Lets start with a four day week for all, no penalty rates, 60% tax on earnings over a million dollars pa. Mining profits to stay in Australia, lower the dollar to 60cents Us, and raise tarrifs to protect what little industry we have left. The results of this will quickly see full employment and a prosperity never seen in this country. But it won’t happen because we are all too ready to roll over for Joe.

  6. Brian Williams

    I used to work with a guy called Peter who was described an ‘ideas man’, and it was quite true. He came up with lots of ideas. The only problem was that 99% of them were fanciful crap.

    As soon as I heard about Joes worldwide GDP growth idea, I thought how well it would have fitted right into Peter’s 99%, which made it all the more incomprehensible to see how the likes of Sky News gushed over the concept this morning, as though Joe was some kind of economic oracle who had come up with a formula that would really make it happen, and save the world.

    The quality of mainstream economic analysis in this country just gets worse and worse.

  7. bushby jane

    Joe seems to have very blinkered vision. He never considers doing things like restoring income tax levels to prior to Costello’s, and isn’t the NBN infrastructure which they could be spending money employing people building? Why is he talking about raising the age pension age when we are being told that young people are staying unemployed at record levels? The Bank of England’s governor is saying that banks should shut up whinging about regulation while Joe had a little snidey about ‘zealots’ wanting to ‘over-regulate’, which I took to be a reference to Gillard’s regulating of financial advisers which he is going to deregulste. And all he talks about is growth, when he doesn’t seem to me to be doing anything to achieve that aim except reduce working people’s wages, although I note that he is apparently still ‘entitled’.

  8. Observation

    Joe is in the team that wants to snow ball all the things that got the world economy in this mess we are in. Rape the tax payer and flow the money into corporations, privatize all public assets to corporations and deregulate the financial institutions. Its all about weakening the commonwealth and bolstering big business.

    These so called world economic leaders have not changed the basics which were proven to fail at the expense of us plebs.

  9. Jimmyhaz


    ‘All the major banks of the world are bankrupt’

    You would have to pull some absolutely fantastic evidence to upgrade that from nothing more than a tinfoil hat theory.

    As to the article, I wish Joe good luck on meeting the original growth forecasts with his economic policy that is more suited to Jack the Ripper than the treasurer of a G20 nation. The man has the economic nuance of a baboon, and honestly sees government spending as the problem, rather than the solution. Someone needs to ask him where the money for private sector growth is coming from if we are current accounts negative, and the RBA is destroying more money than it is creating. Unless Hockey’s plan involves magic, I can’t see it ending in anything other than disaster.

  10. AR

    Taxes are the price we pay for civilisation and welfare is the price the rich pay for (relative) quiescence fro the have-nots.

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