According to the OECD’s latest Economic Outlook released yesterday [Wed 29.5.2013], the global economy is moving forward, but divergence between countries and regions reflects the uneven progress made toward recovery from the economic crisis. Historically high unemployment remains the most serious challenge facing governments, the OECD said.
Concerning Australia, the OECD said GDP growth is likely to slow temporarily to 2.5% in 2013, before picking up to around 3.25% in 2014. The OECD said the expected weakening of the boom in mining investment will be only gradually offset by the sector’s increasing export capacity and the strengthening of the non-mining sector. The “persisting high exchange rate and still fragile confidence are inhibiting the emergence of new drivers of growth”. In the absence of inflationary pressures, monetary policy “should remain accommodative” in order to underpin activity, the OECD said. The OECD said the Australian authorities needed to gradually balance the public budget so as to restore fiscal leeway. Should activity worsen significantly, the OECD considers there is scope in Australia for fiscal policy to be relaxed to support demand. A tax reform to improve the effectiveness of housing taxation [seen as a possible reference to the use of negative gearing and also the tax-free status of the family home] and lower corporation tax by means of an increase in GST would enhance efficiency, the OECD said.
[LTN 103, 30/5/13]