The unemployment rate looks as though it will still be stuck above six per cent when the Abbott government heads to the polls next year.
That’s the assessment of the International Monetary Fund in its April World Economic Outlook, saying Australian economic growth will only gradually rise to three per cent.
Economists say the economy has to be expanding at roughly 3.25 per cent to absorb the growing number of people becoming available for work.
“The downturn in the global commodity cycle is continuing to hit Australia’s economy,” the IMF report released in Washington on Tuesday says.
It puts extra pressure on Treasurer Joe Hockey as he puts together his May 12 budget.
Australia, like other commodity exporters, will see a drop in foreign earnings and a drag on growth, while exacerbating the long-anticipated decline in resource sector investment, the IMF says.
However, it expects lower interest rates and a somewhat weaker exchange rate will help underpin non-resource activity.
The IMF is forecasting Australian growth of 2.8 per cent in the 2015 calendar year and 3.2 per cent in 2016 after 2.7 per cent in 2014.
This is broadly in line with its previous forecast made in October.
But it also warns that significantly slower growth than currently projected for China or Japan – Australia’s top two trading partners – would also affect the rest of the region and the world economy given the size of their economies.
Even so, China is expected to expand at a more sustainable rate below seven per cent both this year and next
More broadly, global economic growth remains moderate but with uneven prospects across major countries and regions.
World growth is projected to be 3.5 per cent in 2015 before ticking up to 3.8 per cent next year.
KEY IMF FORECASTS FOR AUSTRALIA COMPARED TO ACTUAL 2014 RESULTS
2014 2.7 per cent