Global financial rating agency, Goldman Sachs has reduced growth and currency forecasts for the Australian economy.

The agency warned that the Australian economy might slip into a slowdown due to a fall in corporate spending, high exchange rate, lower export prices and reduction in public spending in the country. Goldman Sachs said that the risk of recession in Australia stands at about 20 per cent but said that the stabilising global economy, weakening Australian dollar and low interest rates will be able to ensure growth in the economy.

"While a four-out-of-five chance of avoiding recession doesn't sound alarming, it is notable that this is the highest probability in the post-war period that didn't result in a subsequent recession outside of the global financial crisis. That is, there are few examples where recession risks have risen beyond 10 per cent and the probability of recession didn't exceed 50 per cent and a recession duly recorded in subsequent quarters," a research note from the agency read.

The US investment bank said that the Australian dollar is expected to trade at US85c in 12 months compared to an earlier forecast of US90c. The agency also said that the growth is expected to be 2 per cent, which is lower than the earlier prediction of 2.4 per cent for the economy. It expects the economy to grow at 1.9 per cent in 2014 compared to an earlier estimate of 2.7 per cent for the country.