The OECD has cut its economic growth forecast for Australia next year and warned its member countries to maintain support to preserve confidence and limit uncertainty.
In its interim economic outlook released on Wednesday, the Organisation for Economic Cooperation and Development said the global outlook is subject to considerable uncertainty because of the COVID-19 pandemic.
"The projections assume that sporadic local outbreaks will continue, with these being addressed by targeted local interventions rather than national lockdowns," the Paris-based institution said.
"A vaccination is assumed not to become widely available until late 2021."
It now expects world growth to contract by 4.5 per cent in 2020, compared to the six per cent reduction it had predicted in June. But it has trimmed its 2021 growth forecast to a five per cent expansion from 5.2 per cent previously.
For Australia, it is predicting a contraction of 4.1 per cent this year, an improvement on its previous forecast of a slump of 5.0 per cent.
But for 2021 it now sees growth of just 2.5 per cent rather than 4.1 per cent. This would still be below Australia's long run growth average of 2.75 per cent.
"The localised lockdowns, border closures and new restrictions being imposed in some countries to tackle renewed virus outbreaks are likely to have contributed to the recent moderation of the recovery in some countries, such as Australia," the OECD said.
It said fiscal support needs to be pursued in 2021, and recent announcements in many countries of additional fiscal measures are welcome.
"The aim must be to avoid premature budgetary tightening at a time when economies are still fragile," it said.
Australian Treasurer Josh Frydenberg will hand down his 2020/21 budget on October 6, delayed from its traditional May release because of the pandemic.
Australian Associated Press