The OECD has cut its growth forecast for Australian next year, which would still leaving the economy struggling below its long-term trend.
In its interim economic outlook, the Organisation for Economic Cooperation and Development now expects the Australian economy to contract by 4.1 per cent this year, an improvement on its previous forecast for a slump of 5.0 per cent.
But for 2021 it now sees growth of just 2.5 per cent rather than 4.1 per cent. This is still be 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.
It 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.
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 says this recession will be deeper and unemployment queues will be longer because the government is 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.
Treasurer Josh Frydenberg will hand down his 2020/21 budget on October 6, delayed from its traditional May release because of the pandemic.
