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Confidence fails to get much-needed spark

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March 14, 2018

Tax cuts in the US have upgraded forecasts for world economic growth.

Another upgrade to world economic growth forecasts, due to tax cuts in the US, is likely to fire up the debate over the Turnbull government's efforts to cut the company tax rate.

In its interim economic outlook, the Organisation for Economic Co-operation and Development now expects global growth to be brushing four per cent both this year and next after an estimated 3.7 per cent in 2017 - the strongest outcome since 2011.

Releasing the interim report in Paris on Tuesday, the OECD said a key factor behind its upward revision reflects tax reductions and public spending increases in the US since its previous forecasts made in November.

In January, the International Monetary Fund similarly upgraded its growth outlook on the US tax cuts, sparking a renewed push by the Australian government to sell its corporate tax reduction to 25 per cent for all businesses from 30 per cent over the next decade.

However, the legislation looks set to be blocked in the Senate.

The OECD said its revised forecasts also follow a substantially easier fiscal stance by Germany, something Treasurer Scott Morrison is unlikely to follow when he hands down his budget in May.

The Paris-based institution upgraded its forecast for Australia, predicting a growth rate of three per cent in 2018 and 2019 after last week's national accounts showed annual growth of just 2.4 per cent for 2017.

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