The global outlook is improving but remain fragile, with risks 'tilted to the downside': OECD

The OECD has slightly downgraded its growth forecasts for the Australian economy by 0.1 of a percentage point to 1.8 per cent this year and 1.5 per cent in 2024 as sharply higher interest rates and inflation slow activity.

The figures point to weak conditions over the next two years, increasing the likelihood that unemployment will increase but raising the prospect that price pressures will ease more quickly than the Reserve Bank of Australia expects.

The OECD forecasts that core inflation will average 5.1 per cent this year - 0.5 of a percentage point higher than it predicted in November - but will ease to an average of 2.8 per cent in 2024. This is well below the average of 3.4 per cent forecast by the RBA for next year and within its 2 to 3 per cent target band.

The outlook is underpinned by expectations of below-trend growth across the world and the G20 group of countries of 2.6 per cent this year and 2.9 per cent in 2024, including a significant slowdown in the United States next year to just 0.9 per cent as tighter monetary policy crunches demand.

The British economy is predicted to slump into recession this year before staging a modest recovery in 2024 while Russia, embroiled in an expensive war in Ukraine, is expected to see it economy shrink by 2.5 per cent this year and by 0.5 per cent next year.

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Australia will benefit from an expected economic rebound in its biggest trade partner, China, where growth is projected to average 5.3 per cent this year and 4.9 per cent in 2024.

The country may also get a boost from India, where growth is expected to reach 5.9 per cent this year and accelerate to 7.1 per cent in 2024. Prime Minister Anthony Albanese led a high-level delegation of business leaders to the subcontinent earlier this month to strengthen economic ties.

The think tank said that, overall, the global outlook had improved since November but remained fragile.

"Risks have become somewhat better balanced but remain tilted to the downside," it said, citing the Ukraine war, energy market pressures and "financial vulnerabilities from high debt and stretched asset valuations" as key uncertainties.

It urged central banks, including the RBA, to keep monetary policy tight until "clear signs" that underlying inflation was easing, and called on governments to focus any support to households on those most in need.

Treasurer Jim Chalmers said Australia was not immune from international volatility, "but our economy and financial system are well placed".

Markets have been roiled by several bank failures and bailouts but Dr Chalmers said local institutions were well regulated and capitalised and "have strong liquidity positions".

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