The OECD has broken from the tradition of bland repetition of official forecasts for its report on Australia in its new Global Outlook. From the AFR:

In what it lists as a “potential financial vulnerability”, the OECD says Australia’s relative unit labour costs have surged 54.1 per cent since 2000.

By contrast, labour costs have fallen 14.6 per cent in Germany, 20.4 per cent in the UK, 25.9 per cent in the US and 46.2 per cent in Japan.

A second source of potential weakness identified by the OECD report is the fact Australia has experienced the fourth-highest house price growth of any OECD member.

In findings that will reignite concern Australia’s record low official interest rates may be sowing the seeds of a property bubble, the OECD finds real house prices gained 79.4 per cent between the start of the millennium and the end of June. Only New Zealand, Norway and Canada experienced higher rates of growth among OECD members.

Australia has the OECD’s sixth highest level of household debt, at 184.9 per cent of gross household disposable income, another potential vulnerability.

As a result, the federal government should shun further budget cuts “above those already factored in”, effectively delivering the Coalition a green light to slow its promised return to surplus by 2016/17.