Global credit ratings agency Standard & Poor's has cut its economic growth forecast for Australia as a result of a weaker Chinese economy.
S&P now expects growth to remain below three per cent until at least 2017, as China poses higher volatility and more risks for the Asia-Pacific region.
It expects Australia's economic growth rate to be just 2.5 per cent in 2015 and 2016, and 2.9 per cent in 2017.
S&P also lowered its forecast for China's growth to 6.3 per cent for 2016 and 6.1 per cent for 2017.
The ratings agency said a major correction in China's stockmarket and government measures over the past few months had resulted in concerns about the ability of policy makers to manage market turbulence.
As a result, there were possible spillovers to the domestic economy and the rest of the world.
"Although market fears that the sky is falling are almost certainly overblown, in our view, they have been enough to 'move the needle' and prompt us to update our foreign currency forecasts as well," S&P Asia-Pacific chief economist Paul Gruenwald said.
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