The International Monetary Fund has trimmed its 2013 forecast for Australia's economy and warned of sluggish global growth for this year and next.
However, the Fund says unemployment is only likely to rise slightly, and the wave of mining investment has insulated nation against much of the slowing in Asia.
In its latest World Economic Outlook, released this morning, the Fund says Australia's economy will grow by 3 per cent next year, a downgrade from its previous April forecast of 3.5 per cent.
In 2012, it said the economy would expand by 3.3 per cent, which is consistent with the latest published view of the Reserve Bank.
The world economy's recovery was also faltering, the fund said, as it cut its global growth forecast for 2012 to 3.3 per cent, from 3.5 per cent.
The IMF's chief economist, Olivier Blanchard, said "familiar" forces were to blame for the slowdown, with budget cuts in the developed world hampering economic growth.
"In advanced economies, growth is now too low to make a substantial dent in unemployment. And in major emerging market economies, growth that had been strong earlier has also decreased," he said.
While this environment is expected to weaken commodity exporters such as Australia, the Fund did not predict an abrupt slow-down.
In a view that is more positive than many market economists, it forecast no major changes in the unemployment rate.
The jobless rate would edge up from 5.1 per cent today to 5.2 per cent this year and 5.3 per cent next year, it said.
While Australia's growth had been supported by "strong mining activity and related investment," the short-term outlook for our key trading partners in Asia was "less buoyant" than in recent years.
China's economy was unlikely to return to double digit growth in year ahead, it said, but would still drive much of the region's activity.
"Growth in China is projected to be about 7.75 per cent this year and then to strengthen to 8.25 per cent in 2013 as domestic demand growth, especially investment growth, picks up with the policy easing now under way," the report said.
Although the eurozone's debt crisis had deteriorated since April, Blanchard said that recent moves help boost the capital held by Spanish and Italian banks were positive steps.
If eurozone governments continued with a complex series of recent reforms to bolster the region's banking system without adding to sovereign risk, "one can reasonably hope that the worst might be behind us," he said.
But the fund has no expectations of a fast recovery for the world economy. Last week Blanchard said it would take ten years for the world economy to emerge from the 2008 financial crisis.