'Economy likely to grow below trend as the investment phase of the mining boom passes its peak,' report says
The International Monetary Fund (IMF) expects Australia’s economy to struggle to grow fast enough to relieve pressure on the unemployment rate, which is close to a decade high of just fewer than 6%.
Since October last year, the Washington-based institution has downgraded its Australian growth forecast to 2.6% in 2014 and 2.7% in 2015. It had previously expected growth of 2.8% and 2.9%, respectively.
"Australia's economy is likely to grow below trend as the investment phase of the mining boom passes its peak and begins to decline," the IMF said in its latest Regional Economic Outlook for Asia and the Pacific, which was released in Hong Kong on Monday.
The economy needs to grow by more than 3% a year to keep unemployment in check.
The treasurer, Joe Hockey, has promised his budget would not hinder tentative signs of economic recovery, suggesting spending cuts would occur in the later years of what he has described as a 10-year plan.
In contrast, the IMF has upgraded its New Zealand growth forecasts in the past six months as its post-earthquake reconstruction gathers steam, along with strengthening domestic demand and exports.
It expects the NZ economy to grow at 3.3% in 2014 and 3% in 2015, up from respective forecasts of 3% and 2.4% previously.
More broadly, the IMF said Asia should experience robust growth throughout 2014 and 2015, and be among the global growth leaders.
The region should benefit from improved prospects among the world's advanced economies, while facing new and old risks.
These include geopolitical uncertainty over Ukraine, the exit from unconventional monetary policy in the US – otherwise known as tapering – and the impact of a low-inflation environment in the euro area.
"Growth in China and Japan could also fall below expectations, with negative spillovers from the rest of the region," it said.