Osborne: Many in G-20 see need to live within their means


Finance chiefs from the world’s leading economies broadly agree on the need to undertake structural reforms to boost productivity against a backdrop of loose monetary policy, Britain’s finance minister George Osborne said on Saturday.
Monetary policy has been a key focus at a meeting of finance ministers and central bankers from the Group of 20 in the Turkish capital Ankara this week, but several policy makers have also called for accelerated structural reforms.
“I’m very clear, as indeed are many people sitting around the table, that countries need to live within their means,” Osborne said in an interview, when asked whether there had been discussion of a need for more fiscal stimulus.
“What I think we’re all agreeing on is that there does need to be, alongside the very accommodative monetary policy in many countries you see, real structural reforms.”
A delegate who had seen the latest version of a draft communique from the meeting said it included wording that an overemphasis on monetary policy would not yield balanced growth.
Osborne said “productivity” had been the buzzword in the Ankara meetings, but that turning that into a coherent program of reforms was a challenge for many countries.
On the outlook for China, whose slowdown and market turmoil have cast a shadow over the global economy, Osborne said he saw grounds for optimism.
“What you see is a commitment to that move from an investment-led economy to a consumption-led economy,” he said, adding that the continuation of the reform program was in the interests of the G-20 as a whole.
“We don’t want to see that blown off course. The messages we’ve been receiving here about that have been encouraging.”
The G-20 finance chiefs will agree to calibrate and communicate monetary policy carefully to avoid triggering capital flight, but will not call an expected US rate rise a risk to growth, according to a draft text seen by Reuters.
Many emerging market economies are concerned that when the US Federal Reserve raises borrowing costs, investors will withdraw from other markets and buy dollar assets, weakening other currencies and creating turbulence as capital flees.
“I think the challenge for the emerging markets is to make sure that they are ready for the exit from accommodative monetary policy whenever that happens, whenever that decision is made,” Osborne said.
“There’s quite a lot of focus on the emerging markets, not just China and the stock market there, but on their readiness for this exit from accommodative monetary policy and making sure that they’re undertaking the structural reforms.”


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