The OECD (OECD) said the U.S. tax cuts and fiscal stimulus helped the global economy to grow rapidly and the Australian economy also benefited, but weak housing markets and heavy household debt were the biggest risk of a rebound in the Australian economy.
The latest report from the Organisation for Economic Cooperation and Development points out that "fiscal policy is the most important," and 3/4 of member countries stimulate their economies by increasing fiscal spending and lowering corporate taxes.
While the stimulus is welcome, it could lead to inflationary pressures, leading to higher interest rates, the report warned.
The OECD unemployment rate is set to reach its lowest level since the 1980s and wages in developed countries are starting to rise, the report said, a sign that it is slowly showing.
The outlook continues to be affected by a range of risks, mainly potential trade wars, geopolitical threats and rising oil prices. The Paris-based OECD warned that a sudden surge in interest rates in advanced economies such as the United States could topple the wealth of developing countries.
"uncertainty about Brexit and Italian policy could put pressure on the development of the euro zone," the OECD said.
In Australia, the economy is expected to remain "strong" and offset weak household spending thanks to exports and business investment.
"strong global commodity markets remain an important source of revenue growth and development, but there are also uncertainties and risks."
At a time of sudden slowdown in China, Australia`s biggest concern remains household debt.
The OECD said an unexpected sharp shift in house prices would result in reduced household wealth and could reduce consumption, damage the construction industry, real estate market risks and the need to remain vigilant about high household indebtedness.
Adequate budget repai
The report also highlights issues surrounding rising employment and participation rates, which will keep unemployment at higher levels.
At the same time, questions have been raised about how much spare capacity is left in the economy and how growth translates into uncertainty about stronger wage and income growth.
The latest forecasts support Treasury Secretary Morrison (Scott Morrison) `s budget this month, including tax cuts. He said the speed at which the budget is being repaired "takes full account of the expected growth."
"in particular, the government has proposed that personal tax cuts in the short to medium term, a strong economy, and income integrity measures will help to deliver on the promise of deficit reduction."
Global economic growth will rise from 3.4 percent in 2016 / 17 to 3.9 percent in 2018 / 19, thanks to greater-than-expected growth in the U.S. economy.
