The outlook for growth in Australia remains muted as the war in Ukraine, high inflation and slowdown in China affect economies around the world.
The Organization for Economic Co-operation and Development cut its growth forecast for Australia a touch in its interim forecast report.
Since November, the organization has revised its growth forecast for Australia for 2023 from 1.9% to 1.8% and from 1.6% to 1.5% in 2024.
Globally, the growth outlook has improved slightly, with the Organization for Economic Co-operation and Development expecting growth to rise to 2.6 percent in 2023 and then to 2.9 percent in 2024.
The Organization for Economic Co-operation and Development said the below-trend growth was being driven by tightening policies around the world to counter high inflation.
“However, a gradual improvement is expected over 2023-24 as pressure on incomes from higher inflation rates recedes,” the report stated.
The OECD also raised Australian inflation forecasts from the previous release, and now sees headline inflation of 5 per cent in 2023 and 2.8 per cent in 2024.
She said the improvement in the economic outlook was fragile, with the war in Ukraine and the impact of rising interest rates two main sources of uncertainty.
The report pointed to the failure of the US Silicon Valley Bank as an example of how sharp changes in interest rates in the market endanger the business models of some financial institutions.
Chancellor of the Exchequer Jim Chalmers said that Australia is not immune to volatility but that the Australian economic and financial system is well placed to face the challenges.
“While we receive a lot, we have a lot going on here at home: unemployment at historic lows, good prices for our exports, the beginnings of wage growth,” he said.
“Australian banks are well-regulated, well-capitalised, and have strong liquidity positions,” he added.
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