OECD tips ‘robust’ Australian economic growth – The Australian Financial Review

The OECD upgraded its 2018 estimate of domestic economic growth to 3.1 per cent and slightly edged down the 2019 forecast to 2.9 per cent.

Australia’s economic growth is tipped to remain “robust” and ahead of most advanced economies through to the end of next year, despite global growth tempering and escalating financial risks emanating from the United States, the Organisation for Economic Co-operation and Development says.

“New capacity coming on stream in the resource sector will support exports and business investment will pick up,” the OECD’s biannual global economic outlook says.

Growth of wages and prices will rise gradually, while the unemployment rate will edge lower.”

The OECD upgraded its 2018 estimate of domestic economic growth to 3.1 per cent and slightly edged down the 2019 forecast to 2.9 per cent.

The forecasts are less bullish than the Reserve Bank of Australia, which is forecasting growth of 3.5 per cent and 3.25 per cent respectively.


The OECD said risks from the housing market and high household indebtedness warrant “continued vigilance” by regulators.

Globally, the Paris-based OECD said growth would remain strong but has passed its recent 3.7 per cent peak and faces escalating risks including international trade tensions and rising US interest rates.

The OECD noted “the global economy is navigating rough seas” and “policy makers will have to steer their economies carefully”.

Global GDP is now expected to expand by 3.5 per cent in 2019, compared to 3.7 per cent forecast in its May outlook, partly due to a shakier outlook in emerging market economies such as Turkey, Argentina and Brazil.

“In many countries, unemployment is at record lows and labour shortages are beginning to emerge,” the OECD said.

“But rising risks could undermine the projected soft landing from the slowdown. Trade growth and investment have been slackening on the back of tariff hikes. Higher interest rates and an appreciating US dollar have resulted in an outflow of capital from emerging economies and are weakening their currencies.”

By 2020, tighter fiscal and monetary policy in advanced economies, as well as slowing international trade, is expected to contribute to a further global slowdown to a growth rate of 3.5 per cent.

Australia is forecast to moderate to a 2.6 per cent expansion in 2020 due to slowing global growth and capacity constraints.

Treasurer Josh Frydenberg’s said the OECD’s  upbeat assessment proved the Coalition government’s economic plan was delivering, evidenced by a low jobless rate of 5 per cent.

“The OECD’s assessment builds on recent findings from global credit rating agencies, Standard & Poor’s and Fitch, which reaffirmed Australia’s AAA credit rating and the International Monetary Fund which recognised our budget management and strong economic growth,” Mr Frydenberg said.

The Paris-based organisation said the Reserve Bank of Australia could gradually begin lifting its 1.5 per cent overnight cash rate in the next two years, as wages and inflation pick up due to a tightening labour market.

“Exports and investment will support growth. Household consumption growth will slow, as households become less willing to draw down savings amid falling house prices and tightening financial conditions. Drought in the farming sector will likely have a modest negative effect on growth,” the OECD said.

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