Tony Abbott has said Australia wants the G20’s Brisbane meeting to produce a three-page communique explaining precisely how countries’ “good intentions are being put into practice”.
Laying down his priorities for the November conference he will host, Abbott told the Davos World Economic Forum that trade came first and “at the very least, the G20 should renew its commitment against protectionism and in favour of freer markets”.
Each country should renew its resolve to undo any protectionist measures put in place since the global financial crisis.
“Better still, each country should commit to open up trade through unilateral, bilateral, plurilateral and multilateral actions and through domestic reforms to help business engage more fully in global commerce.”
As a trading nation, Australia would make the most of its presidency of the G20 to promote free trade.
Abbott is anxious the Brisbane meeting concentrates on the practical and is seen to achieve outcomes. rather than being a “talkfest”.
In his speech, he highlighted one of the problems of a globalised economy that provides more ability to take advantage of different countries’ tax regimes.
“Different national tax arrangements have not always kept up with the rise of services and the pervasiveness of digital technologies.
"So the G20 will continue to tackle businesses artificially generating profits to chase tax opportunities rather than market ones.
"The general principle is that you should normally pay tax in the country where you’ve earned the revenue,” he said.
“My hope is to have a really frank leaders-only discussion in Brisbane about the biggest issues we face, including digitalisation and its implications for tax, trade and global integration.
"Because taxes need to be fair, as well as low, in order to preserve the legitimacy of free markets. For the leaders of the countries generating 85% of the world’s GDP merely to agree on the principles needed for taxation to be fair in a globalised economy would be a big step forward.”
Abbott said that as an “infrastructure prime minister”, his hope as G20 host was to bring policy makers, financiers and builders together to identify practical ways of increasing long-term infrastructure financing.
“What investors really need is greater confidence that governments won’t change the rules after the investment has been made.”
As the G20 had assumed its current form in response to the GFC triggered by bad banking practices, at the heart of its work was building the financial sector’s resilience. This involved helping to prevent and manage the failure of globally important financial institutions; making derivatives markets safer; and improving the oversight of the shadow banking sector.
“Financial regulation is always a work-in-progress but these reforms now need to be finalised in ways that promote confidence without eliminating risk,” Abbott said.
“On trade, tax, infrastructure, employment and banking, we owe it to our citizens, on whose behalf we attend international conferences, to maximise the specific outcomes from this year’s G20.”
Governments must always remember that an economy was far more like an organism than a machine. “A strong economy is far less likely to be one responding to central control than one spontaneously generating its own growth.”
Speaking about the global outlook, Abbott said that as 2014 began, it was easier to be optimistic, although the recovery remained fragile.
“The challenge, everywhere, is to promote sustainable, private sector-led growth and employment – and to avoid government- knows-best action for action’s sake,” he said.
“The challenge, as we continue to work through the weaknesses that brought on the crisis, is to strengthen governance without suppressing the vitality of capitalism.”
As always, stronger economic growth was the key to addressing almost every global problem. “Stronger growth requires getting government spending under control so that taxes can come down, and reducing regulation so that productivity can rise.”
Speaking about the Australian economy, Abbott had a crack at Labor. He said that in the decade before the GFC, consistent surpluses and a preference for business helped Australia become one of the world’s best performing economies. “Then a subsequent government decided the crisis had changed the rules and that we should spend our way to prosperity. The reason for spending soon passed but the spending didn’t stop because, when it comes to spending, governments can be like addicts in search of a fix.”