The Organisation for Economic Cooperation and Development (OECD) has suggested Treasurer Joe Hockey be careful about implementing his bidget cuts, while also warning borrowers about the expected rise in interest rates.

The OECD backs te government’s goals of returning the Australian economy to surplus early next decade. “But given economic uncertainties, it should avoid heavy front-loading,”

According to OECD figures, Australian economic growth will fail to reach the projected target of 3.1 per cent; instead coming in at 2.5 per cent by 2015. This will improve to 3 per cent by 2016 as the flow on from ballooning house prices will create more wealth in the economy. “Faster growth in housing construction and exports will also play a role,” says the study.

OECD public forum. Image: www.flickr.com

OECD public forum. Image: www.flickr.com

There were grim predictions, however, for the jobless rate. The study predicted it was unlikely to dip below 6 per cent until 2016.

And while most people are expecting the Reserve Bank of Australia to raise the historically low cahs rate early in the new year, the OECD paper believes this will come in the second half of 2015.

On the whole the paper advised the federal government and economic bodies to be very careful next year. A booming housing market and wild mortgage lending, particularly to property investors, needed constant vigilance. As too did the resources sector, suffering from steep falls in some commodity prices. The OECD warned there may be a flow-on effect in rapidly changing resource revenues.

Non-mining investment was the great unknown. The OECD was either unable or unwilling to predict when it might pick up enough to sustain the economy.

 

OECD forecasts for Australia

GDP

2014 – 3.1 per cent

2015 – 2.5 per cent

2016 – 6.1 per cent

 

CPI

2014 – 2.6 per cent

2015 – 2.3 per cent

2016 – 2.6 per cent

 

Unemployment

2014 – 6.1 per cent

2015 – 6.2 per cent

2016 – 5.9 per cent

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