The International Monetary Fund has sent Scott Morrison a warning as he puts together his first budget.
The IMF has cut Australia's economic growth forecast for this year and is predicting unemployment still remaining close to six per cent in 2017.
That runs contrary to the Turnbull government's mantra of delivering policies that will drive jobs and growth.
In its latest World Economic Outlook, the IMF expects commodity-exporting advanced economies like Australia to continue to adjust to reduced income from falling prices and resource-related investment.
It expects Australian growth to remain below its potential at 2.5 per cent in 2016, down from a previous forecast of 2.9 per cent made six months ago.
However, it does predict growth rising above three per cent over the following two years, supported in part by a more competitive currency.
The Washington-based institution has also made across-the-board cuts to its global growth forecasts.
"Global recovery continues, but at an ever-slowing and increasingly fragile pace," IMF economic counsellor Maurice Obstfeld says in the report.
Despite a cloudier economic picture, financial markets in advanced economies have partially reversed the "swoon" of the first few weeks of 2016.
But significant downside risks remain that could trigger renewed turbulence, impairing confidence and demand "in a self-confirming negative feed loop", he says.
KEY POINTS
* World growth trimmed to 3.2 per cent in 2016, 3.5 per cent in 2017.
* Advanced economies suffer growth cuts, notably Japan turning negative in 2017.
* China forecast to grow at 6.5 per cent in 2016, easing to 6.2 per cent in 2017.
* India avoids the mass downgrade, remaining at 7.5 per cent this year and next.
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