Australia’s Westpac leading index indicates sub-trend growth to continue

Australia’s economic outlook appears subdued for the remainder of 2024, according to the latest data from Westpac’s leading index, which fell from -0.03% to -0.23% in March. This decline signals continuation of “sub-trend” growth, as characterized by Westpac, suggesting that the economic performance may not reach the usual growth standards expected within the country.

Westpac projected that Australia’s GDP growth will remain modest at of 1.6% for 2024. This follows a similarly soft performance in 2023, where GDP grew only by 1.5%. Such figures are notably below the typical “trend” growth rate of around 2.5%.

Looking ahead, the focus shifts to the upcoming Q1 CPI data, set to be released on April 24. Westpac anticipates that this report will show deceleration in inflation to 3.5%, a development that could reinforce RBA confidence that inflation is on path back to target range of 2-3%.

However, the decision for RBA to shift to a more definitively “on hold” stance regarding interest rates will hinge on the specifics of the price updates and a broader assessment of risks.

Full Australia Westpac leading index here.