Observing that globally there is now more willingness to use fiscal space, US Treasury Secretary Jacob Lew has said there is a greater push for inclusive growth than ever before.
“You look in the last six months not only have we seen communication to use all policy tools, but you see the actions that governments have taken. From China to Canada to Japan and South Korea to Europe, you’re seeing more willingness to use fiscal space,” Lew said yesterday.
“As we discussed throughout the G-20 Leaders Summit in Hangzhou, there is a greater push for inclusive growth than ever before. Broader access to, and participation in, the financial system can directly help people manage risk, absorb financial shocks, and build assets. It also has positive impacts on issues like growth and inequality,” he said.
The US has made important progress – including the longest streak of total job growth on record and sustained real wage growth in recent years, but there remains much more work to do, Lew said in his address to the annual meeting of the International Monetary Fund and the World Bank.
Observing that global economy faces challenges, Lew pressed for aggressive use of all tools to support growth – continued monetary accommodation, further demand-strengthening fiscal policies and demand-supportive structural reforms.
“Near-term fiscal support continues to be essential, and is especially appropriate in countries with fiscal space – which nearly every country has,” he said.
Noting that Japan has appropriately delayed its consumption tax hike and announced new fiscal stimulus in an effort to support activity in the near term, Lew said in China, fiscal policy can effectively buffer the short-term impacts of its structural reform agenda, particularly should growth slow significantly.
Fiscal support complements structural reforms and supports domestic demand, particularly consumption, he said.
Germany has once again come in with a larger-than-expected federal budget surplus in the first half of the year.
The spending that Europe has been burdened with to deal with the refugee crisis has quite self-consciously not come at the expense of other spending but rather has been additive, he said.
“And while we welcome new spending in Korea’s supplemental budget, Korea can do more to support growth and reduce its large external surplus,” Lew said.
“In discussions with my European colleagues this week and since the British Referendum, I have emphasised that an outcome that produces a highly integrated relationship between the EU and the UK is in the best interests of Europe, the United States and the global economy,” Lew added.