OECD downgrades Australia economic outlook – Treasurer Jim Chalmers says future ‘darker, dangerous’

Australia’s economy may be outperforming Europe and the US, but the country is not safe from a bleak global outlook.

Global growth is expected to decline from 3% in 2022 to 2.25 percent in 2023, according to the Organization for Economic Co-operation and Development’s Interim Economic Outlook.

A lot of uncertainty underlies these forecasts, with a worst-case scenario where severe fuel shortages hit European economies hard, cutting off another 0.5 percent of global growth by 2023.

Australia’s relatively strong GDP score was noted in the report, but declining demand for exports, such as resources, could slow growth.

Japan, Korea and Australia currently have slightly stronger growth momentum than Europe and the United States, but that is expected to decline in the coming quarters, partly due to weaker external demand, the report said.

The OECD report downgraded Australia’s economic position from June forecasts and forecast real GDP growth of 4.1 percent in 2022 and 2.0 percent in 2023.

Core inflation in Australia is also expected to reach 5.4 percent in 2022, before falling to 4.3 percent in 2023.

Treasurer Jim Chalmers agreed that Australia was not immune to the problems facing the global economy.

“The OECD report shows that the global economy is entering dangerous territory – with slowing global growth, rampant inflation, falling real wages and extreme uncertainty,” he said.

“These challenges are increasing, they are not disappearing, and Australia is not spared this dark and more dangerous global outlook.”

Federal treasurer Jim Chalmers (pictured) said Australia is not immune to ‘darker and more dangerous’ times as the OECD lowered the country’s economic outlook

dr. Chalmers, however, said there was reason to be optimistic about the longer-term future of the economy.

He said his first budget, to be paid in October, would focus on delivering “responsible” living expenses.

The OECD report warns countries to avoid providing short-term cost-of-living support that would fuel inflation.

The report recognizes that support for households facing high energy costs is likely to be needed.

“However, this should be temporary, target the most vulnerable, maintain incentives to reduce energy consumption and be withdrawn as pressures on energy prices ease,” the report said.

Australia’s relatively strong GDP score was noted in the report, but declining demand for exports, such as resources, could slow growth. Pictured: A Sydney tradition

Food security remains a major concern for the global economy, with extreme weather events due to climate change likely to worsen the situation.

The grim walk through the state of the global economy reveals that inflation has spread widely across many economies since Russia’s invasion of Ukraine.

“The effects of the war and the ongoing impact of COVID-19 outbreaks in some parts of the world have affected growth and put additional upward pressure on prices, especially for energy and food,” the report said.

Rising interest rates and easing supply bottlenecks are likely to dampen inflation, but rising energy costs and labor shortages are likely to slow the pace of the decline.

According to the OECD report, headline inflation in the G20 group of economies, including Australia, will decline from 8.2 percent to 6.5 percent in 2023.