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Sorting out this G20
letter published in The Australian, 6 April 2009

Denis Shanahan (April 4) suggests the G20 summit was a success because "it wasn't an obvious failure" that would have undermined confidence. Another interpretation is that it succeeded because, contrary to the predicted big centre-piece of the summit, there was no decision to seek additions to the massive fiscal stimulus measures already undertaken by individual governments.

One example of the evident failure of such measures to slow the fall in economic activity is apparent from the 0.4 percentage point jump to 8.5 percent in the US unemployment rate in March, and the accompanying White House spokesman's prediction of "additional severe job cuts in America".

In these circumstances the apparent acceptance of the need to pause and allow the de-leveraging process to work its way through individual economies was sensible and supported the German view - but not Kevin Rudd's. Let us hope the latter will accept the implicit G20 decision and avoid a third round of supposed stimuli in Australia.

Where the G20 summit failed badly was in omitting to acknowledge the need for individual countries to review their monetary policies. In most G20 countries the failures of those policies were a major cause of the crisis and the accumulation of so-called toxic assets.

True, there was agreement to establish a more pro-active global banking watchdog: but watchdogs are no substitute for pro-active individual country monetary policies.

Unfortunately too there will be another G20 summit. Better not: Shanahan correctly warns that more hype about the supposed virtues of the G20 could adversely affect confidence.

Des Moore
Director, Institute for Private Enterprise
South Yarra Vic

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