The Organisation for Economic Co-operation and Development ‘s (OECD) Economic Outlook report has found that the fundamentals and outlook for the Australian economy remain in a healthy state, despite continuing deterioration of the global economy.

 

“The growth of the Australian economy, which was slowed by natural disasters in early 2011, should pick up and remain above or around potential in 2012 and 2013,” the report concludes.

 

The report cites strong investment and increasing exports, specifically from the mining sector, as main reasons for a strong economic baseline.

 

“Unemployment is expected to stay low and underlying inflation contained as the remaining slack in the economy gradually disappears,” the report concludes.

 

In addition, the OECD warns of serious downside risks to this outlook, particularly the possibility of a sovereign default in the euro area causing contagion to spread to other markets. 

 

According to the OECD, "without preventive action, events could strengthen such pressures and plunge the euro area into a deep recession with large negative effects for the global economy."

 

Despite the turbulence in the global economy, the OECD forecasts the Australian economy is still expected to grow substantially faster than its peers, with growth of 4.0 per cent in 2012 and 3.2 per cent in 2013.

 

Treasurer Wayne Swan took the opportunity to calm fears of impending large-scale Federal Government cuts to patch the $20 billion budgetary black hole that has emerged as a result of the European debt crisis.

 

“In these uncertain times for the global economy, the Government recognises the importance of striking the right balance between budget discipline and continuing to support job creation and growth.  Just as it would be wrong to abandon our determination to return to surplus in 2012-13, it would also be counterproductive to take an axe to the budget,” Mr Swan said.

 

 Australia's economic outlook can be found here