Tough times...the OECD has backed the idea of stimulus plans by governments.
The Organisation for Economic Cooperation and Development (OECD) is predicting that Australia will be one of only a few countries to avoid a recession in the current global downturn. The Paris-based organisation forecasts that the richest economies in the world will shrink by a collective 0.4 per cent next year.
The half-yearly report predicts that 21 of the 30 member economies of the OECD will go through a protracted recession of a magnitude not seen since the early 1980s. But Australia's economy is likely to avoid the worst of the financial meltdown, with predictions it will grow by a relatively healthy 1.7 per cent.
That is only slightly less than Treasurer Wayne Swan's prediction of 2 per cent growth.
"These forecasts are encouraging, but I think what the OECD has confirmed [is that] we are facing extremely difficult global conditions," Mr Swan said.
Mr Swan says the report highlights the challenges facing the Australian economy. He says the forecasts are encouraging but the report also shows Australia is not immune from the global downturn, with the OECD predicting unemployment will rise to 6 per cent by 2010, and house prices could drop sharply.
"There are underlying strengths in the Australian economy but what this OECD report identifies is the risk to the outlook from global developments and in particular they note the risk posed by a further decline in the terms of trade and a greater weakening of the Chinese economy," he said.
The OECD also predicts that inflation might dip below 3 per cent in two years' time. One of the OECD's chief economists, Klaus Schmidt-Hebbel, says that globally the outlook is bleak.
"We think that there are significant risks of the financial situation and turmoil we are living through now, the crisis may extend beyond the next month," he said.
"There may be more financial institutions which go under, which will require rescue and this implies more stringent credit constraints for households and for people."
Source: ABC