The Australian economy is poised to rebound after the disruptions of the natural disasters of earlier in the year, the OECD has predicted.
Growth is projected to accelerate from 3% in 2011 to 4.5% in 2012, according to the organisation's latest Economic Outlook.
While unemployment is set to fall, the “remaining slack in the economy” should mute the risk of inflation pressures.
Globally, financial recovery is well underway, but the world's economy is still in a delicate state, according to the OECD. The organisation projects an increase in global GDP of 4.2% this year, and 4.6% in 2012.
Across OECD member economies, GDP is expected to rise by a more modest 2.3% this year and 2.8% in 2012.
The OECD said the recovery is becoming self-sustained, with trade and investment slowly starting to replace fiscal and monetary stimulus as the main drivers of economic growth.
But it warned that downside risks, including possible further increases in oil and commodity prices, a stronger-than expected slowdown in China and the fragility of the Japanese and US economies, threaten growth.
“This is a delicate moment for the global economy, and the crisis is not over until our economies are creating enough jobs again,” OECD secretary-general Angel Gurría said.
“There is also some concern that if downside risks reinforce each other, their cumulative impact could weaken the recovery significantly, possibly triggering stagflation in some advanced economies.”
Stagflation refers to a situation where inflation is high but economic growth is low and unemployment is high.
The organisation also warned of the “increasingly urgent” issue of growing government debt, which is set to rise to just above 100% of GDP for the OECD as a whole. Debt levels are about 30 percentage points above their pre-crisis level, Gurría said, warning that they “must be stabilised and then reduced as soon as possible.”