World enjoying best growth since 2010: IMF

Colin Brinsden, AAP Economics Correspondent
(Australian Associated Press)

The International Monetary Fund says the global economy is enjoying its strongest performance since the start of the decade.

In its latest World Economic Outlook released on Tuesday, the IMF says the global upswing that began in mid-2016 has become broader and stronger, led by faster growth in the Euro area, Japan, China and the US.

"The partial recovery in commodity prices should allow conditions in commodity exporters to gradually improve," the Washington-based institution said, as it made a modest upgrade to Australia's outlook.

The IMF stuck to its most recent world growth forecast of 3.9 per cent for both this year and next.

This is the strongest pace since the growth spike in 2010 which initially followed the 2008-2009 global financial crisis.

It now sees Australia growing at three per cent in 2018 compared to its previous 2.9 per cent prediction made in February, while keeping 2019 at 3.1 per cent.

Such growth should help the Australian jobless rate ease to 5.2 per cent in 2019 and close to what the Reserve Bank believes to be "full employment" at five per cent.

The unemployment rate was 5.6 per cent in February.

However, the IMF warns future growth prospects look challenging for advanced economies faced with ageing populations and low productivity growth, making it hard for household income growth to return to their pre-GFC pace.

It also says interest rates may need to rise more quickly than expected if excess demand emerges, which would stress highly indebted countries, firms, and households.

Escalating trade restrictions and retaliation is another risk to the outlook, it said, noting the first shots in a potential trade war involving the US have now been fired.