Australia’s economy faces “sluggish” growth amid warnings of an asset bubble in the property sector that needs to be “closely monitored”, the United Nations says in its latest economic report for Asia and the Pacific.

The UN report forecasts economic growth for Australia of 2.8 per cent in 2014, “due to falling mining investments, fiscal restraint and fragile private consumption”, ahead of the 2.3 per cent set for 2013.

The slide in commodity prices, a driving force of growth in recent years, is adding to the economic slowdown in Australia against the backdrop of a “weak global economy”.

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The UN’s annual economic survey for the Asia Pacific noted that weak labour conditions “would help keep a lid on inflation”, but commodity exports would continue to play a key role in the outlook despite China’s policy shift to domestic-led growth resulting in a softening of demand.

A key concern was a possible asset bubble in the domestic housing market. “The housing market is likely to strengthen, but the possibility of an asset bubble should be monitored closely,” the UN warned.

The UN said despite an “orderly depreciation” of the Australian dollar, monetary authorities should hold back from raising interest rates, as the decline “was needed to improve the competitiveness of non-resource sectors”.

The report was more optimistic over the outlook for the New Zealand economy, where growth was tipped at 3.3 per cent for 2014, up from the 2.7 per cent achieved in 2013.

“Higher net immigration, better prospects for the dairy industry, and the reconstruction activities” from the Christchurch and Canterbury earthquakes of 2010 and 2011 would continue to support the economy.

The Insurance Council of New Zealand recently reported that New Zealand residents are to receive payouts of $NZ12 billion ($A11.17 billion) to cover the costs from the earthquakes.

But the outlook remained dependent on the “strength of private consumption and investment” given a tightening of budgets and monetary policy.

A chief concern lay in the short term for New Zealand exports. The “possible headwinds” lay in a stronger New Zealand dollar hurting export growth.

The report added that surging house prices and monetary policy tightening in the United States “may push up interest rates, placing strains on investments and consumer spending”.