Thursday 16 Aug 2018 | 20:11 | SYDNEY
Thursday 16 Aug 2018 | 20:11 | SYDNEY

Rudd at the UN: Support for G20 welcome


Stephen Grenville

29 September 2008 08:41

Kevin Rudd’s speech to the UN General Assembly set out some specifics for reforming the international financial system. It’s good to see him plugging the G20 as the centre-piece of this agenda.

He was diplomatic enough not to draw attention to the irrelevance of the UN’s own specialized institution – the International Monetary Fund – in the current troubles. The IMF’s 185-strong membership is too large and too diverse to have a sensible discussion on this topic. Its smaller governance groupings have been unable to reform their composition to reflect today’s realities rather than the power balance of fifty years ago.

Thus the G20 group would seem to be well suited to work out the Big Picture of what to do. It was set up in the wake of the Asian crisis ten years ago precisely to provide a forum for such weighty discussions, and brings together ministers of finance and central bank governors from the 19 systemically important countries. Its membership reflects current realities (so Asia is properly represented). Another plus for G20: Australia gets into this group – just.

The PM noted that the IMF and the Financial Stability Forum (the Basel-based specialized grouping on financial regulation) lack political authority. Indeed, one of the problems in attempting to establish firm prudential rules has been the strength of the vested interest lobby groups. Financial institutions have resisted prudential rules that would crimp their profits, and commercial motives have prevailed too often (for example, with rating agencies).

Most of the heavy lifting will have to be done at the domestic level (after all, the crisis reflects failures of policy and systems in the US, not internationally). But strong measures in G20 would strengthen the hand of domestic regulators and prevent competitive bidding to see who can attract the most business by the lightness of their regulation.