The Paris-based economic think tank said the pace of economic reform has not been fast enough in recent years, and the federal government had slowed down competition changes that would strengthen the economy.

But it gave an upbeat appraisal of the economy in the short term, arguing there were good signs for low inflation, strong productivity and employment growth.

Federal Treasurer, Peter Costello immediately welcomed the positive comments made by the OECD but failed to dwell on its criticisms of the pace of economic reform.

“Looking forward, the OECD expects a continuation of strong economic growth over the next two years, underpinned by strong productivity growth and accompanied by low inflation and an unemployment rate around current levels,” he said in a statement

Every year the OECD gives its assessment of the economy and its future, based largely on briefings from Canberra.

However, it appears the OECD has listened to some of the concerns from business groups who want the government to use its majority in the Senate to ramp up the pace of reform.

The OECD said reform appeared to have slowed in recent years.

“The pace of reform has recently not been as strong as it could have been,” it found.

It said high effective marginal tax rates were hurting the economy, even being one of the factors for the flight of highly-trained specialists to low-tax Asian capitals.

The OECD believes the government must tackle personal and business tax reform if Australia was to remain internationally competitive.

It warned if the government failed to tackle some of the major looming issues, such as the ageing of the population or taxation reform, then the success of recent years would fade.

“There is no guarantee that Australian economic performance will continue to be as impressive as it has been over the past 13 years,” it found.