As investors grapple with renewed jitters in global markets, a new analysis paints a fairly upbeat outlook for Australia of robust economic growth, more jobs, rising wages and a sound budget position.
But the Organisation for Economic Co-operation and Development report also warns that interest rates could start rising towards the end of this year as wages and inflation growth start to pick up.
In its latest Economic Outlook, released in Paris on Wednesday, the OECD expects business investment to strengthen in Australia while exports will be boosted as a greater capacity to deliver resources comes on stream.
"Strong global commodity markets remain an important source of income gains and growth but also of uncertainty and risk," the OECD says.
It warns a slowdown and rebalancing of the Chinese economy could be a larger drag on growth than expected.
It also sees a further risk from the high indebtedness of households.
"Unexpectedly large corrections in house prices would reduce household wealth and could cut consumption and damage the construction sector," it says.
However, the Paris-based institution believes public investment in roads and other infrastructure projects will support Australia's economic expansion.
On this month's federal budget, the OECD believes the pace of deficit reduction is "ample" given projected economic growth while noting the proposed reductions in personal taxation over the short and medium term.
While government debt has risen in recent years, it says it remains relatively low and is projected to start falling given the government's goal to reduce the annual budget deficit by 0.5 percentage point of GDP per year over the four-year budget horizon.
OECD'S KEY AUSTRALIAN ECONOMIC FORECASTS:
2017 (actual) 2.3 per cent
2017 (actual) 2.0 per cent
2017 (actual) 5.6 per cent