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Labor has defended its economic track record as sluggish growth is expected for the Australian economy, while unemployment is likely to climb.

Treasurer Jim Chalmers will meet with world counterparts in Washington as the International Monetary Fund flags protectionist trade policies and commodity price shocks as lurking economic risks.

The IMF’s latest economic growth assessment is little changed from its previous update, forecasting 3.2 per cent global growth in 2024 and 2025.

In Australia, the meagre 1.2 per cent growth projected for 2024 is expected to pick up to 2.1 per cent in 2025.

The inflation outlook is less optimistic, with consumer price growth to hold at 3.3 per cent throughout 2024 and 2025.

Labor cabinet minister Clare O’Neil denies the government is spending too much, saying surpluses have been achieved because “difficult decisions” have been made to cut back on wasteful spending.

“We’ve been in government for two years, delivered two back-to-back budget surpluses,” she told Nine on Wednesday.

Asked about interest rates staying high if inflation wasn’t curbed, Ms O’Neil said the government remained concerned about households struggling.

A federal election must be held by May.

The global battle against inflation had largely been won, the United Nations’ financial agency declared in its October world economic outlook.

Yet downside risks, such as the possibility of the conflict in Middle East escalating and triggering another resurgence in oil prices, were increasing and now dominating the outlook.

Global economic uncertainty was set to underpin discussion at the G20 finance ministers’ talks in the United States.

Ahead of the meetings with economic ministers and central bank governors from major economies, Dr Chalmers said Australia was not immune from the volatility and vulnerability wreaking havoc globally.

“Conflict in the Middle East compounds the pressures already coming at us from the war in Ukraine, the slowdown in China, persistent global inflation, tepid global growth and sharp movements on stock markets,” he said ahead of the talks on Thursday.

“There is always a premium on responsible economic management and engagement but especially now, with all this uncertainty around the world.”

In April, the organisation thought inflation would be back at the top of the Reserve Bank of Australia’s two-three per cent target band by 2025.

In the IMF’s assessment of Australia’s economy from early October, it highlighted elevated underlying price pressures and said interest rates should be kept high to finish the job.

While price pressures persisted in Australia and some other nations, IMF chief economist Pierre-Olivier Gourinchas said the battle against inflation had “largely been won”.

The decline in inflation without a global recession was a “major achievement”, he said.

The unusual resilience throughout the disinflationary process could be chalked up to the nature of the initial price spike, first triggered by pandemic supply chain disruptions and then the war in Ukraine.

The global inflation dragon may have been tamed, but downside risks were clouding the outlook, the report said.

Escalation in regional conflicts could push up commodity prices and a deeper economic slowdown could eventuate in China.

Interest rates staying too high for too long and expanded protectionist policies were other downside risks.

Poppy Johnston and Tess Ikonomou
(Australian Associated Press)