(Australian Associated Press)
The Australian economy is set to be hit by slower than expected global growth over the next two years, as trade tensions simmer on between the United States and China and banks tighten their lending purses.
Treasurer Josh Frydenberg says the forecast – delivered by the International Monetary Fund on Tuesday – is proof Australia must “stay the course” and stick with the government’s economic plan.
But Labor says the government’s plan isn’t delivering for many people.
The IMF has revised its global economic growth forecast for 2019 to 3.5 per cent, down 0.2 percentage points on its previous estimate, and 3.6 per cent for 2020 (down 0.1).
In the latest update of its World Economic Outlook, the IMF warns risks to global growth include tightening financial conditions and trade tensions between the United States and China.
A possible “no deal” exit by the UK from the European Union and a stronger than expected slowdown in China are also among risks.
“If countries resolve their differences without raising distortive trade barriers further and market sentiment recovers, then improved confidence and easier financial conditions could reinforce each other to lift growth above the baseline forecast,” the report says.
“However, the balance of risks remains skewed to the downside.”
Apart from resolving trade issues, the IMF has recommended countries look at their domestic financial and economic policies as a buffer.
“Across all economies, measures to boost potential output growth, enhance inclusiveness, and strengthen fiscal and financial buffers in an environment of high debt burdens and tighter financial conditions are imperatives,” the report says.
Mr Frydenberg says the latest figures show the need for stability.
“As the global storm clouds gather, it’s more important than ever that we stay the course on our economic plan. A plan that has delivered more jobs, lower taxes, and a budget that will be in surplus after a decade of deficits,” he told reporters in Sydney on Tuesday.
“What the Australian economy and what 25 million Australians can’t afford is Labor’s punitive, high-taxing agenda.”
Prime Minister Scott Morrison backed the treasurer’s sentiment, stressing taxes under Labor will weigh down growth.
“We are going into a tougher environment and now more than ever, you must be able to know how to get the economic settings right to protect people’s jobs, their livelihoods, to be able to invest in hospitals and schools.
But Opposition Leader Bill Shorten said the best way to protect Australia’s economy against global shocks is to ensure everyone gets a fair go, which requires better hospitals and schools.
“For too many Australians our economy isn’t delivering,” he told reporters in Queensland on Tuesday.
“The trick to making our economy robust in a global environment is to make sure that you bring people with you.”
Shadow treasurer Chris Bowen said Labor is the only major party with economic and tax policies designed to restore fiscal buffers and pay down debt in a fair way.