If Treasurer Scott Morrison is hoping for an economic growth spurt to help repair the budget, he could be disappointed.
The Organisation for Economic Cooperation and Development expects the Australian economy to be travelling at a sub-three per cent pace by the end of 2016 and does not expect it to pick-up above this level again until 2018.
The economy was expanding at an annual 3.3 per cent pace as of June.
However, in its latest Economic Outlook, the OECD expects by 2018 unemployment will be down to 5.3 per cent and inflation will be a more normal 2.1 per cent.
"LNG production will boost exports and negative effects from shrinking mining investment will diminish," the Paris-based institute said in the report released on Monday.
As such it does not envisage the Reserve Bank will be cutting the cash rate any further and by late 2017 the central bank will be raising the rate, which it sees as appropriate given monetary policy developments elsewhere.
The US Federal Reserve, for example, is expected to lift its key rate again in December.
A rate hike in Australia would help unwind tensions from the low-interest environment, notably in the housing market, which has experienced rising prices in many places for sometime.
In the meantime, in the event of disappointing economic growth, the onus should be on fiscal policy to support the economy, it says.
"There is already fiscal space to respond to an unanticipated downturn in activity."
Like the Reserve Bank and the International Monetary Fund, the OECD believes there is room to accelerate public investment spending underway in telecommunications, roads and transport systems.
It notes the Turnbull government's efforts in tax reform, such as better targeting superannuation and proposed cuts in the corporate tax rate.
"However, the reforms fall short of a major shift in taxation as recommended in OECD economic surveys, which stress the importance of efficient tax bases, such as the goods and services tax and land tax," it says.
OECD AUSTRALIAN ECONOMIC FORECASTS:
GDP
2016 - 2.7 per cent
2017 - 2.6
2018 - 3.1
CPI
2016 - 1.3 per cent
2017 - 1.8
2018 - 2.1
UNEMPLOYMENT
2016 - 5.7 per cent
2017 - 5.5
2018 - 5.3
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