The latest forecasts provided by the OECD and World Bank demonstrate the rapidly deteriorating global economic conditions Australia now confronts. The OECD's Interim Economic Outlook says the world economy is in the midst of the deepest and most synchronised recession in our lifetimes.
The OECD expects output in its 30 member economies to contract by 4.3 per cent in 2009 — contributing to what would be the first decline in world output since World War II. It says a policy‑induced recovery is expected to take shape in the OECD economies through 2010.
The OECD also expects that the massive falls in global output seen in the final quarter of 2008 will be repeated in the first quarter of 2009. OECD‑wide output contracted at an annualised rate of 7.1 per cent in the December quarter.
The worsening global recession and dramatic downgrades in global growth have serious consequences for our economy and make a period of negative growth inevitable in Australia.
According to the OECD, the severity of this global recession is without precedent in the post-war period, and it is forecasting global economic activity (representing four-fifths of world output) to fall by 2¾ per cent in 2009 and global trade to fall more than 13 per cent.
Clearly, this global recession will have profound human consequences with the OECD-wide unemployment rate expected to reach double-digit levels by the end of 2010. This has obvious implications for jobs in Australia.
The World Bank has also dramatically revised down its global growth forecasts to -0.6 per cent in 2009. This marks a substantial 2.5 percentage point downgrade from its December forecasts. With most advanced economies in deep recession, the World Bank expects growth in developing economies will also slow sharply, with some slipping into recession.
The Australian Government has already acted decisively with substantial economic stimulus to support growth and jobs in our economy and these figures from the OECD further underscore the importance of this decisive and early action.
The OECD's analysis demonstrates that Australia's economic stimulus measures, with a strong focus on direct government investment, are amongst the most effective of all OECD fiscal packages in terms of stimulating activity and supporting employment.
The latest OECD and World Bank economic forecasts further underscore the need for urgent, decisive and globally coordinated action to respond to this global crisis.
That's why both the Prime Minister and I are attending the G-20 Leaders' Meeting in London this week. The meeting comes at a crucial time for the world economy. It is imperative that G-20 members rise to the challenge and forge the political consensus necessary to deal with the global financial crisis and the global economic recession.
There are no quick fixes to this global recession and its full effects are still yet to be felt. But the Government is doing everything within our power to cushion Australians from the worst the world can throw at us.
31 March 2009