“Global growth is sluggish and precarious but it does not have to be this way because some of this is self-inflicted.
“Dynamism in the global economy is being weighed down by prolonged policy uncertainty as trade tensions remain heightened despite the recent US-China trade truce, technology tensions have erupted, threatening global technology supply chains, and the prospects of a no-deal Brexit have increased.”
Since its October update last year, the IMF has downgraded expected global growth by half a percentage point for 2019.
While the fund upgraded some forecasts for the US and parts of Europe, it warned some of this was due to a run-up in inventories rather than increased demand for goods and services.
It noted that many central banks, including the Reserve Bank of Australia, had either started cutting interest rates or signalled they would soon do so.
Ms Gopinath said interest rates would need to remain low, especially as there were few inflationary pressures. But that also meant keeping an eye on potential financial problems that could flow from those low rates.
“With persistently low interest rates, macro-prudential tools should be deployed to ensure that financial risks do not build up,” she said.
The RBA has cut official interest rates at its last two meetings, with markets expecting it to cut again in November. That would take the cash rate down to a fresh record low of 0.75 per cent, from 1 per cent now.
There have been some signs that the cuts, together with the Morrison government’s recent income tax cuts, have boosted the flagging property market.
But the Commonwealth Bank has cautioned there are continuing troubles in other parts of the economy.
Combining data from the spending transactions of its customers via their EFTPOS, BPay and direct debit accounts with Google search trends, CBA believes it can pinpoint consumers’ intentions by between one and four months.
CBA chief economist Michael Blythe said while there appeared to be positive signs in terms of home buying, in other areas, particularly retail and motor vehicle purchases, the tough times of recent months were likely to continue.
“The indications are that, aside from the occasional bounce, retail spending remains a fairly lacklustre affair,” he said.
“This weakness underlies the need for income tax cuts to boost household spending power.
“Other sectors appear to be bottoming out (travel, entertainment) or picking up (health, education).”
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.