Australia’s growth outlook still subdued: OECD

Australia’s growth outlook remains muted as the war in Ukraine, sky-high inflation and the slowdown in China weigh on economies around the world.

The Organisation for Economic Co-operation and Development has downgraded Australia’s growth forecasts a touch in its interim outlook report.

Since November, the organisation has revised Australia’s 2023 growth projection down from 1.9 per cent to 1.8 per cent and from 1.6 per cent to 1.5 per cent in 2024.

Globally, the growth outlook has improved a little, with the OECD expecting growth to pick up to 2.6 per cent in 2023 and then 2.9 per cent in 2024.

The OECD said the below-trend growth was driven by policy tightening around the globe to counter high inflation.

“Nonetheless, a gradual improvement is projected through 2023-24 as the drag on incomes from high inflation recedes,” the report said.

The OECD also upgraded Australia’s inflation forecasts from the previous edition, and now sees headline inflation of five per cent in 2023 and 2.8 per cent in 2024. 

It said the improved economic outlook was fragile, with the war in Ukraine and the impact of higher interest rates two key sources of uncertainty. 

The report pointed to the failure of the US Silicon Valley Bank as an example of how sharp changes in market interest rates were putting some financial institutions’ business models at risk.

Treasurer Jim Chalmers said Australia was not immune to the volatility but Australia’s economy and financial system are well placed to weather the challenges.

“While we have a lot coming at us, we’ve got a lot going for us here at home: unemployment at historic lows, good prices for our exports, and the beginnings of wages growth,” he said.

“Australia’s banks are well-regulated, well-capitalised and have strong liquidity positions,” he added.