The federal opposition believes the Reserve Bank of Australia, and not the government, should do much of the heavy lifting if the local economy needs a boost in the face of a souring global economy.
An International Monetary Fund briefing note shows Australia did not miss out on a new round of global economic growth downgrades, with the agency now forecasting three per cent growth in 2012, down from the 3.3 per cent forecast in September.
The G20 briefing note, which has only just come to notice, was published ahead of the IMF's World Economic Outlook Update released earlier this week which made no specific reference to Australia.
In light of the downgrade, opposition treasury spokesman Joe Hockey was asked on Melbourne Talkback Radio (MTR) what sort of policy action Australia needed to take faced with a slowing economy.
"I think the Reserve Bank has the capacity to do much of the initial heavy lifting and to stimulate economic growth by reducing interest rates," Mr Hockey said on Friday.
"Interest rates today are comparatively high as compared to the rest of the world and the bank has tremendous capacity to move further to stimulate economic growth by reducing interest rates, and they should do that before the government starts spending."
He said because the government had overreacted during the global financial crisis and spent too much money, the central bank could only cut the cash rate to three per cent.
But Opposition Leader Tony Abbott said the Gillard government can't see a problem "without throwing money at it".
"The lesson of the eurozone crisis is that governments that spend too much, borrow too much and tax too much eventually cause enormous problems for their people," Mr Abbott told reporters in Melbourne.
Assistant Treasurer Mark Arbib said such reckless comments by the opposition leader, comparing Australia to Europe, posed a danger to the economy.
"These kinds of irresponsible comments damage confidence and make life harder for Australian businesses," Senator Arbib said in a statement.
"It would be laughable if it weren't so dangerous."
Economists and financial markets are predicting a further cut in the cash rate, after the reductions in November and December to 4.25 per cent, when the RBA meets on February 7.
The IMF's latest expectation for Australia compared with the central bank's year-average growth forecast for 2012 of 4.0 per cent it made last November.
The RBA will update its forecasts in its quarterly statement on monetary policy on February 10.
Treasurer Wayne Swan told the Australian Financial Review on Friday that Australians should take a more balanced view of the economic outlook.
"I think there's just a tendency out there in our public discussion to focus far too heavily on all the risk being on the downside," he told the newspaper.
"There's no doubt that the situation in Europe is serious. There's no doubt it is dragging on global growth."
But he said the government's growth forecasts made in the mid-year budget review released in November reflect what the IMF is forecasting now, including its expectation of a recession in Europe.
The government and the central bank are both forecasting growth of 3.25 per in the 2012/13 financial year.
