THE International Monetary Fund (IMF) has confirmed it expects Australian economic growth to remain below trend this year and next, as the mining investment boom wanes.But in a mixed assessment of Asia and the Pacific in its latest Regional Economic Outlook released in Washington on Friday, the IMF expects neighbouring New Zealand to gain a boost as its post-earthquake reconstruction is accelerated.
It has cut its economic growth forecast for the region to 5.1 per cent for 2013, down from a 5.7 per cent prediction made in April.
For 2014 growth is now seen at 5.3 per cent rather than six per cent.
It says activity among emerging economies in the region lost their impetus during the first six months of 2013.
"Tepid external demand from advanced economies and a slowdown in China dampened industrial activity throughout much of emerging Asia," it says.
At the same time, many of these economies have endured tighter financial conditions as a result of expectations that the US Federal Reserve will start winding back its monetary policy stimulus.
In India, one of Australia's major trading partners, the fallout from financial stress has likely left corporate and bank balance sheets vulnerable, leading to a further downward revision to growth forecasts that were already historically lower.
While China has been insulated from recent financial market vulnerability, the IMF expects continued measures to slow credit demand from the excesses of the past should put the economy on a slower trajectory.
The IMF has cut its growth forecasts for emerging Asia by 0.9 per cent since April for both 2013 and 2014 to 6.3 and 6.5 per cent respectively.
Among advanced countries in the region, an economic upswing in Japanese growth has been a "bright spot" and is starting to lift the country out of chronic deflation.
"In Australia, a slowdown in the resource investment boom will drag down growth but in New Zealand continued low interest rates and the acceleration of post-earthquake reconstruction will provide a boost to the economy," it said.
As in the World Economic Outlook released earlier this week, the IMF lowered its Australian forecasts to 2.5 per cent for this year and 2.8 per cent for the next, bringing it more into line with Australian Treasury and the Reserve Bank of Australia's forecasts.