The Group of Twenty (G20) Finance Ministers and Central Bank Governors will travel to Sydney this week to hold their first official meeting of 2014 and discuss important issues such as fiscal policies, bank sector regulation, and free trade.
Finance and Central Bank Deputies will hold their first meeting on Thursday, February 20th, followed by another of Finance Ministers and Central Bank Governors on Saturday, February 22nd.
The main focus, according to Capital Economics Senior Economist Andrew Kenningham, will probably be the United States' monetary policy as a result of the impact that the unwinding of the Federal Reserve's (Fed) asset purchases is having on emerging markets. However, there is no consensus among policy-makers from emerging economies on what the Fed should be doing, Kenninham adds.
Kenninham notes how Reserve Bank of India Governor Raghuram Rajan had explained that monetary policy coordination has 'broken down' and called on the Fed to take more account of the world when setting its policy. Central banks in three emerging market G20 countries - India, South Africa and Turkey - have been forced to raise interest rates this year in order to prop up their currencies. Rajan is expected to elaborate his view further.
"However, despite these protests, EM policy-makers do not have an agreed view about what they would prefer the Fed to do. After all, less than a year ago there were loud complaints from several emerging economies that excessively loose policy in the US and Japan was driving up their real exchange rates
and undermining their competitiveness," says Kenningham.
"More generally, the G20 looks increasingly as if it is just going through the motions, without any conviction that it will achieve anything substantive," he concludes.
DEFLATION, ABENOMICS, CHINA...
Another major talking point will be the threat of global deflation, which is pressuring central banks to maintain flexibility in their monetary policies. Tied into this, José Luis Martínez Campuzano, Citi Strategist in Spain, expected to hear references to weak economic growth in the Eurozone.
Campuzano foresaw a debate on European integration and its political and social risks. However, in his opinion, agreements on this front would be difficult to reach.
The G20 was also expected to revisit a major theme from prior meetings, concerns that Japan is creating an unfair competitiveness advantage thanks to "Abenomics" and its currency depreciation.
China will be another major theme with the potential for policy members to address the country's excess private debt or economic policies. According to analysts at Barclays, one of the greater risks for 2014 is a possible liquidity crisis in that country.