Only a forceful programme of repair and reform will return economies to strong and sustainable real growth, writes the Bank for International Settlements (BIS) in its 83rd Annual Report, released today.
In its main economic review for the year, the BIS points out that although six years have passed since the eruption of the global financial crisis, robust, self-sustaining growth still eludes the global economy.
“During this time, central banks in advanced economies have been forced to look for ways to increase their degree of accommodation,” the report says.
“But central banks cannot solve the structural problems that are preventing a return to strong and sustainable growth.
“Central banks cannot repair the balance sheets of households and financial institutions.
“Central banks cannot ensure the sustainability of fiscal finances.
“And, most of all, central banks cannot enact the structural economic and financial reforms needed to return economies to the real growth paths authorities and their publics both want and expect.”
The BIS report says labour and productivity reforms, debt reduction and financial sustainability should be the focus as the global economy works through the post-GFC period.
“Authorities need to hasten labour and product market reforms so that economic resources can shift more easily to high-productivity sectors.
“Households and firms have to complete the difficult job of repairing their balance sheets, and governments must intensify their efforts to ensure the sustainability of their finances.
“Regulators have to adapt the rules to a financial system that is becoming increasingly interconnected and complex and ensure that banks have sufficient capital and liquidity buffers to match the associated risks.
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“Each country needs to tailor the reform agenda to maximise its chances of success without endangering the ongoing economic recovery.”
The BIS has ranked Australia’s big four banks as the most profitable in the developed world for the third straight year.
In figures published today the Commonwealth Bank, Westpac, ANZ and NAB made better returns in 2012 than lenders in 10 major developed countries including Canada, the US, Britain and Europe.
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