In addition, business investment will likely remain subdued this year, while the government will face increasing pressure from the business community to deliver reforms in this term of government around tax and industrial relations.

In releasing the EPO, CEDA Chief Executive, Professor the Hon. Stephen Martin said in addition to the economic and political forecasts, this year the publication also examines government productivity, red tape and how external factors will shape Australia's economy, in particular looking at China.

"These issues were selected because they must be put under the national spotlight this year if we are to keep the Australian economy on track to lift its productivity and international competitiveness," Professor Martin said.

"Reducing red tape and improving government productivity are areas that need a strategic long-term plan. The business community expected clarity on how these issues would be tackled with the change of Federal Government last year, but unfortunately the clarity has not yet come to fruition.

"To make real changes in government productivity we must have an informed public debate on the role of government and what services the public is willing to pay for, it cannot simply be about reducing the head count in the public sector.

"CEDA last year called for an increase in the Medicare levy to better cover the cost of healthcare in Australia and that is the exact type of discussion that needs to be on the table now.

"In addition, introducing measures to reduce red tape, such as periodic audits of regulators and government departments, should be a priority."

On the political front, Professor Martin said the Commission of Audit and spending cuts will be centre stage at a Federal level along with how Tony Abbott and his team manage the Senate.

"While it is expected the Senate will favour a coalition government, key members are likely to be unpredictable and it will take enormous diplomatic skill to manage," he said.

"At a state level, our experts predict changes of government in South Australia and Tasmania."

CEDA's EPO, which has been produced annually for more than 30 years, provides analysis and discussion from leading economic, political and academic analysts on key issues that will have a significant impact on Australia in 2014.

CEDA 2014 EPO contributing authors are:

• Economic outlook - Warren Hogan, Chief Economist, ANZ; Katie Hill, Economist, ANZ
• Political outlook - Sabra Lane, Political Correspondent, ABC 7.30
• Government productivity - Dr Anne Tiernan, Associate Professor, School of Government and International Relations, Griffith University
• How the 'Great Convergence' is changing Australia - Roger Donnelly, Chief Economist, Export Finance Insurance Corporation (EFIC)
• Red tape in finance and its discontents - Professor Rodney Maddock, Adjunct Professor of Economics, Monash University; Vice Chancellor's Fellow, Victoria University; and President, Economic Society of Australia (Victorian branch)