Australia’s GDP growth will weaken to 1.75 per cent next year from 2.50 per cent this year before rising to 2.75 per cent, according to an OECD Economic Outlook report.
“The impact of the financial crisis and the fall in the terms of trade should be relatively contained,” the report said, despite projecting a rise in unemployment to 6 per cent over the period.
It also projected inflation may dip below 3 per cent in 2010 due to the slowdown, which it said “militates for looser monetary conditions”.
The recent Budget measures, made possible by the significant leeway built in previous years, will also support activity, although their effectiveness might be limited if confidence is not restored, the report said.
These OECD projections represent a relative rosy outlook next to the US, which it said is heading for a “pronounced contraction in activity over the near term and a further deterioration of the labour market”.
It found the country’s financial crisis has “intensified at a time when growth had already been weakened by the prolonged housing downturn”.
“An additional fiscal stimulus package might become desirable in the near-term if financial conditions do not quickly improve.”
Economic conditions in the UK have deteriorated markedly and forward-looking indicators suggest a further sharp weakening in activity over the next quarters, the report said.
