While the Australian economy is expected to grow strongly over the next few years, much of the rest of the world's prospects remain uncertain, according to financial services firm Perpetual.
Australia's gross domestic product (GDP) is expected to jump 4 per cent and strengthen even more in 2012, Perpetual Investments head of investment market research Matthew Sherwood said.
"This view is underpinned by the expectations that unemployment will continue to decline as more labour resources are absorbed into the mining sector and the long awaited investment boom begins in the second half of 2011," he said.
"This view is also supported by a recent upgrade to Australia's terms of trade, which is now expected to be around its highest ever level in the near term.
"In the absence of a severe shock to the Asian economies, it is very hard to envisage these trends changing in the near term as producers in the global commodities markets are struggling to increase supply in a meaningful way that could outstrip the expected growth in demand."
He said the 2011 global outlook is clouded by increased uncertainty with many tailwinds, including Asia's industrialisation, but also headwinds such as the state of household and government balance sheets in major advanced economies.
"At present the world economy is growing above trend at around 4.5 per cent, but this is unlikely to last," Sherwood said.
"Overall, the central forecast for the global economy was still for trend growth, around 4 per cent, over the next couple of years as growth in Europe, Japan and Asia eases back but the US further strengthens."
But Sherwood warned that several European countries would require financial assistance in 2011, with Portugal, Belgium, Spain and Italy being the likely candidates.
Earlier in the week, Ireland received a lifeline of around $110 billion from the European Union and the International Monetary Fund.
"While growth prospects appear brighter than was the case six months ago, volatility also increased and is likely to remain elevated throughout 2011," Sherwood said.
"In this environment, cashflow generation, dividend income and market valuations are things to watch."
