Westpac Leading Index in Australia has shown a marginal decline from -0.38% to -0.40% in October, underscoring the ongoing trend of subdued economic growth. This marks the fifteenth consecutive month where the index’s growth rate has been below zero, signaling that the Australian economy is likely to continue experiencing limited growth into 2024.
Despite this, the overall growth rate can still be considered moderately positive, especially when viewed against current annual population growth rate of approximately 2.4%. Both Westpac and RBA project the economy’s actual growth to be within the range of 1-2% for both this and the coming year, a rate that lags behind potential trend growth.
A key concern for RBA is the adequacy of this sluggish growth in achieving inflation target of 2-3% within a reasonable timeframe. As highlighted in RBA’s recent November meeting minutes, Board maintains a strict stance of “low tolerance” against any further unexpected rises in inflation or delays in returning to the target range. This stance indicates that RBA’s policy meetings in the upcoming year will be crucial and “live”.