There is more trouble in store for Asia in the coming year, with only Australia escaping the ongoing drag of the world's feeble economic recovery, the Organisation for Economic Co-operation and Development has warned.

The Paris-based organisation's annual World Economic Outlook spelled out a number of pitfalls facing China, Japan, South Korea and other countries, and said that only a commitment to structural reform can turn them around.

Asian growth

China: 2002: 7.9% 2003: 7.5% 2004: 6.9% Japan: 2002: -0.7% 2003: 0.8% 2004: 0.9% South Korea: 2002: 6.1% 2003: 5.8% 2004: 5.7% Australia: 2002: 3.5% 2003: 3.7% 2004: 3.8% New Zealand: 2002: 3.8% 2003: 3% 2004: 3.4%

The worst hit, as the OECD made clear in a separate report released earlier this week, is Japan, where "anaemic" growth of less than 1% is the best that can be hoped for without a root-and-branch attempt to tackle bad debts and deflation.

But even China, long seen as the region's potential powerhouse, will see growth fall away from the 7%-plus it is achieving this year unless its weakly-regulated banking sector cleans up its act.

And South Korea, also a success story in relative terms through the tough times of the past couple of years, is in danger from spiralling home prices and double-digit pay claims.

Wired

Only two states in Asia - Japan and South Korea - are actually members of the 30-nation group.

But the report pointed out that the hard work put in by Singapore, Taiwan and Hong Kong since the disastrous Asian currency crash of 1997-8 put them ahead of their OECD member neighbours.

And in general, the report pointed to a dedication to the so-called "knowledge economy" lacking elsewhere.

South Korea, for instance, is now a world leader in internet access, and hopes to give every home broadband access by 2005.

Looking up down under

But while the OECD had a warning for almost every country it looked at, Australia was the exception.

Despite a drought afflicting the nation, growth of 3.5% this year and 3.75% in 2003 is plausible, it said.

Its forecast is actually more optimistic than that of the government, which says the OECD has failed to take into account the worsening of the dry spell in the past couple of months.

Treasurer Peter Costello is expected to cut his own prediction for growth in the 12 months to June 2003 from 3.75% to 3% in a budget update next week.