Treasurer Josh Frydenberg has promised the Morrison government will continue to do what is necessary to cushion the economy from the blow of the coronavirus pandemic.
In the run-up to his October 6 budget, the Organisation for Economic Cooperation and Development has revised up its interim economic outlook for Australia.
It now predicts a smaller contraction of 4.1 per cent in 2020, compared to the five per cent contraction it forecast in June.
However, for 2021 it now sees growth of just 2.5 per cent rather than 4.1 per cent. This is still below Australia's long-run growth average of 2.75 per cent.
"The localised lockdowns, border closures and new restrictions being imposed in some countries to tackle renewed virus outbreaks are likely to have contributed to the recent moderation of the recovery in some countries, such as Australia," the OECD said.
Mr Frydenberg jumped on the OECD's warning.
"Put simply, closed borders cost jobs and put the economy in a weaker position to recover," the treasurer said.
Mr Frydenberg, a Victorian MP, has been vehemently opposed to his state's strict lockdown to combat the second wave of COVID-19.
In its interim economic outlook, the OECD now expects world growth to contract by 4.5 per cent in 2020, compared to the six per cent reduction it had predicted in June. But it has trimmed its 2021 growth forecast to a five per cent expansion from 5.2 per cent previously.
It says fiscal support needs to be pursued in 2021, and recent announcements in many countries of additional fiscal measures are welcome.
"The aim must be to avoid premature budgetary tightening at a time when economies are still fragile," the Paris-based institution said.
Mr Frydenberg said the government has responded to this unprecedented pandemic shock with more than $300 billion in economic support.
"The Morrison government will continue to do what is necessary to cushion the blow and help all Australians get to the other side of the crisis," he said.
Shadow treasurer Jim Chalmers said the OECD had joined the Reserve Bank and prominent economists' calls for more support, with the Australian economy forecast to be weaker for longer.
"The latest OECD's report makes it clear that ongoing support from the Morrison government in the economy will be required to tackle the jobs crisis and set Australia up for the recovery," Dr Chalmers told AAP.
He said this recession would be deeper and unemployment queues would be longer because the government was leaving too many people behind in this first recession in three decades.
"Instead of a jobs plan, Scott Morrison and Josh Frydenberg want to wind back JobKeeper, cut super, cut wages, freeze the pension, point the finger and shift the blame," he said.
Australian Associated Press
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