On Monday, the IMF’s Christine Lagarde gave a speech that noted global growth prospects were now lower:

Overall, the global outlook has weakened further over the last six months—exacerbated by China’s relative slowdown, lower commodity prices, and the prospect of financial tightening for many countries. Emerging markets had largely driven the recovery and the expectation was that the advanced economies would pick up the “growth baton.” That has not happened.

Indeed, for many advanced economies, the recovery is proving more moderate than anticipated. In the United States, growth is flat due partly to the strong dollar; in the Euro Area, low investment, high unemployment and weak balance sheets weigh on growth; in Japan, both growth and inflation are weaker than expected.

While emerging markets are a very diverse group, the story is broadly similar.China’s transition to a more sustainable economic model—which is good for China and the world—means that its growth rate, while still strong, is lower. Downturns in Brazil and Russia are larger than expected. The same is true for the Middle East—hit hard by the oil price decline. Many African and low-income nations also face diminished prospects.

Others making this observation include the World Bank, OECD and Gavyn Davies of the Financial Times. Although LaGarde specifically mentioned fiscal policy as a potential remedy, the political will doesn’t exist to implement this option. 

The RBA maintained rates at 2%. Their statement contained an interesting observation on the Australian housing market: “Low interest rates are supporting demand, while supervisory measures are working to emphasize prudent lending standards and so to contain risks in the housing market.”  Several years ago, there was concern the Australian housing market was in a bubble. However, banks are now more aggressive regarding loan applications: