Australian Economy

OECD slashes global growth forecasts, urges Australia to keep shifting to renewable energy as Ukraine war continues

Australia has been encouraged to keep transitioning to renewable energy, as the war in Ukraine exposes the risks to global energy security.

The Organisation for Economic Co-operation and Development (OECD) said the world was paying a “hefty price” for Russia’s war.

It said the war is a humanitarian disaster, killing thousands of people, forcing millions from their homes, and triggering a cost-of-living crisis affecting people worldwide. 

It said the conflict had also exposed how energy security and climate mitigation were intertwined, and it was urging governments to “shift gear” to accelerate the global transition to renewable energy.

It is encouraging Australia to make further investments in its transmission networks to support its renewable energy transition.

OECD says inflation will be higher and more persistent, with slower growth

The OECD released its latest Economic Outlook on Wednesday.

It slashed its forecast for global growth this year and doubled its inflation forecast, saying the world’s economies had been hit by more shocks in recent months as the Ukraine war continues.

It estimated world growth would now be 3 per cent in 2022 — down from the 4.5 per cent it was projecting in December.

It forecast inflation to hit nearly 9 per cent, on average, in OECD countries this year, which is twice what it was previously projecting.

OECD inflation components
Pandemic-related effects account for a sizeable share of the recent increase in headline inflation around the world(Source: OECD Economic Outlook, Source: Volume 2022 Issue 1 preliminary version, page 33)

It said the inflationary pressures globally would likely be stronger and longer lasting than expected, making the world’s economic recovery more complicated and fraught. 

“There have been several significant changes in the global economic environment in recent months, including the worldwide spread of the Omicron variant of the SARS-COV2 virus and the greater-than-expected persistence of inflationary pressures, entailing a faster adjustment of monetary policy in a number of major economies than previously expected,” the report warns.

“The single greatest change, however, is the economic impact of the war in Ukraine.

“The war in Ukraine has quashed hopes that the inflationary surge experienced in much of the global economy in 2021 and early 2022 would subside quickly.

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