Assistant Treasurer Josh Frydenberg says he is much more concerned about the state of the global economy after his trip to the World Economic Forum this week, and he is determined to reinforce the case for budget repair when he returns to Australia.
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Mr Frydenberg attended the World Economic Forum in Davos, Switzerland, this week, and met with officials from the International Monetary Fund and World Bank, and political and economic leaders from other major economies.
He says the prevailing view about the prospects for global growth was "less sanguine" than he had been expecting, with the one "shining light" being the United States economy.
"It's reinforced in my mind why we need to successfully tighten our belts in Australia, because we just don't know when the next GFC will hit," Mr Frydenberg said.
"It means we need to keep making the case publicly as to why we're doing what we're doing, and that is, trying to fix Labor's budgetary mess that we inherited.
"If we don't bridge that structural deficit we're only going defer the pain."
Both the IMF and World Bank have recently downgraded their projections for global growth this year, citing a slowdown in China, and anaemic growth in Europe.
The recent huge declines in the global price of oil, and the outcome of the Greek elections this week – won by the far-left Syriza – were also concerning for global leaders, Mr Frydenberg says.
"We have to be very conscious that there will be a slowdown in the world economy," Mr Frydenberg said.
"It means lower demand for Australia's resources, lower demand for our goods and services, and that's going to hurt our revenue projections."
The warning comes as the Bureau of Statistics plans to release important inflation data on Wednesday. It will be a crucial bit of information, coming just one week before the Reserve Bank meets to decide on interest rates.
Economists predict the data will show Australia's annual inflation rate has dropped below 2 per cent. If that happens, it will strengthen the case for the RBA to cut interest rates to try to stimulate growth.
The official cash rate is already sitting at an historically low 2.5 per cent.
Mr Frydenberg says the "one shining light" in the global economy appears to be the strength of the United States economy, where the unemployment rate is now lower than Australia's, and the rate of economic growth is above 3 per cent.
He says one of the reasons why the US economy has been able to improve has been because of its "labour market flexibility", in comments that could flag the government's interest in pursuing industrial relations reform.
"Some people were saying that the world economy is like a plane flying on one engine, with that engine being the US economy," Mr Frydenberg said.
"That statement in itself doesn't reflect the strength of the Chinese economy, but it does reflect that outside of China and the US there's not a lot of joy on the global economic scene."
Mr Frydenberg said Australia was still admired for its strong economic position "compared to other countries", and there was still "strong interest" for international corporates to continue to invest in Australia.
"But it's reminded me why what we're doing is, you know, on the right track," he said about his government's budget strategy.
"The write-downs in global growth projections from the IMF and World Bank are with good reason, and we need to factor this into our decisions around revenue forecasts but also about our spending."
