The latest OECD Interim Economic Outlook projects a weaker than previously anticipated global growth of around 3% in 2025-2026 – substantially below pre-pandemic levels – while recommending limited interest rate cuts and restrictions on government spending.
TUAC’s response, published today, urges the OECD to shift its focus from combatting inflation to boosting growth and employment, stressing that policymakers need to rebalance their approach by giving more weight to government spending.
With inflation now largely contained, the OECD's hesitant approach to lowering interest rates is increasingly difficult to justify. The data shows that inflation levels are already below target in several major economies. The real danger now is that continuing restrictive monetary policies poses a significant risk of triggering a downward spiral in employment and further weakening already fragile economic growth.
TUAC warns that the Outlook’s prescription of gradual interest rate reductions coupled with cutting government spending creates a dangerous policy mix that could push economies back into the “low inflation trap” of the previous decade. This risk is particularly acute given that several major economies including France, Italy and Canada already have inflation below their targets. Rather than fiscal restraint, TUAC advocates for public investment as the path to both economic growth and sustainable public finances.
The economy needs more than just careful interest rate management. What's required is a two-engine approach - monetary policy working alongside expanded public investment - to create sustainable growth that benefits everyone.
TUAC expresses disappointment that the OECD continues to advocate for labour market “flexibilisation” despite its own research showing these policies increase inequality and harm vulnerable workers. Instead, TUAC calls for strengthened collective bargaining to address the excessive market power of employers and the decoupling of productivity and wages.
Regarding defense spending increases across OECD countries, TUAC notes that while European budget rule changes might create more investment capacity, over 60 percent of EU military expenditure flows to the United States rather than staying within European economies. This results in a reduced economic multiplier effect compared to investing in domestic infrastructure and social programs. TUAC particularly emphasises that working people should not be the ones paying for military armament through deteriorating public services.
TUAC also expresses alarm about escalating trade tensions, highlighting that the OECD overlooks a critical solution: how targeted public investment could offset the negative impacts of trade disputes. The current approach disproportionately affects working people, particularly those with lower incomes who face both price increases and employment insecurity.
Read TUAC’s full analysis of the OECD Interim Economic Outlook here.
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