A week after the World Bank cut its global growth forecast for 2012 and 2013 due to the worsening eurozone sovereign debt crisis, the International Monetary Fund (IMF) followed and made its own downgrade.

Due to the higher risks to stability in spite of different policy steps taken by European nations to avert the looming debt crisis and ensuing bank problems, the IMF predicted global growth would only be 3.3 per cent in 2012 and 3.9 per cent in 2013.

The downgrade represents a 0.7 and 0.6 percentage points downgrade since the IMF issued its last forecast in September 2011, according to the fund's Global Financial Stability Report Update released on Wednesday.

The IMF forecast is slightly brighter than the World Bank's outlook of a 2.5 per cent and 3.1 per cent global growth projection in 2012 and 2013.

For the debt-ridden eurozone, the IMF said that the region would like suffer a mild recession in 2012 and would contract by 0.5 per cent but grow by a weak 0.8 per cent in 2013.

Advanced economies would likewise slowdown with forecast growth rates of only 1.2 per cent for 2012 and 1.9 per cent in 2013.

However, unlike the World Bank downgrade which came with a warning of chaos worse than the 2008 global financial crisis, the IMF was more subdued and warned of a deceleration in global activity, but predicted that there would be no collapse.

On the more positive side, the IMF said it expects global inflation to ease even as it reminded governments to reconsider the pace it reduced current budget deficits. It advised countries not to tighten further policies as a response to unexpected downturns in growth.

"The most immediate policy challenge is to restore confidence and put an end to the crisis in the euro area," the IMF stressed.

The fund added that if downside risks to growth would take place, it recommended further monetary stimulus including through quantitative easing or the printing of more money.

The IMF report was released hours before the Australian Bureau of Statistics would unveil inflation numbers for the 4th quarter of 2011. The consumer price index rate of 3.1 per cent is expected to support another round of overnight cash rate reduction of 25 basis points by the Reserve Bank of Australian when the monetary committee meets on Feb 7.

Although the IMF did not reduce its growth forecast for Australia, it warned Australian banks to have billions of dollars in cash as a backup plan in cash the country's property market collapses.

The basis of the IMF warning is a new study that showed Melbourne is one of the global cities where houses are unaffordable. The Australian city was even ahead of London, New York and Los Angeles.

"Combining residential mortgage shocks with corporate losses expected at the peak of the global financial crisis would put more pressure on Australian banks' capital," the IMF said.

The big four - Commonwealth Bank, Westpac, National Australia Bank and ANZ Bank collectively account for 80 per cent of Australia's residential mortgage market.

The IMF also warned that the commodities market on which Australia relies heavily could decline by up to 14 per cent in 2012 due to a slowdown in Asian growth.

Data from the Department of Foreign Affairs and Trade showed that the overall value of Australia's exports went up 17.34 per cent in 2010-11, driven mainly by higher prices even as volumes remained steady.

Higher export values were registered for iron ore, coal, crude petroleum natural gas, nickel and precious metal ores.

By state, Western Australia accounted for 40 per cent of the country's export while South Australia's export volume rose 21.5 per cent, mainly driven by wheat exports.

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