Growth is slowing across the world, inflation is on the rise, asset prices are falling and the reality that addressing climate change will be costly is hitting home. The latest ANZ economic monthly report says that the 'easy prosperity' of the middle of this decade has clearly passed.

Deputy chief economist and head of industry and strategic research Tony Pearson says the years 2004 to 2007 were the four strongest consecutive years of growth for over 30 years, with an average global growth rate of 4.7%, but in 2008, growth has slowed, with the downturn led by the US and the UK.

Consumer price inflation is rising worldwide, says Pearson, with global inflation forecast to reach an annual average rate of 4.9%. However, he predicts it will ease to 3.5% in 2009 as a result of the slowing in economic momentum, provided there are no further increases in commodity prices, particularly oil.

Pearson reports that efforts to deal with climate change, while necessary, will have significant costs which still need to be quantified. However, he reiterates that the cost of inaction may be higher than the cost of action.

Despite the gloom, Pearson says the outlook for Australia is still bright largely due to the rise in commodity prices. Although the country's economic growth rate will slow quite sharply in 2008/9, it will not be due to global influences but rather the deliberate slowdown engineered by the Reserve Bank to cool inflationary pressures.

He concludes that while there are considerable challenges, it is still a great time to be Australian.