Australia Leading Index Signals Above-Trend Growth Momentum Next Year
(RTTNews) - Australia's leading index signaled that the growth will move at a slightly above-trend pace in early 2026, Westpac said on Wednesday.
The six-month annualized growth rate in the Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, rose to 0.35 percent in October from 0.10 percent in September.
"While the growth signal is not particularly strong, it is consistent with Westpac's view that activity will continue to pick up steam over the rest of this year and into next, with GDP growth forecast to rise from 1.8%yr currently to 2.4%yr over 2026," said Westpac Economist Ryan Wells.
The drivers of this improvement were centered on the surge in the Westpac-MI Consumer Expectations Index, the level of S&P/ASX200 and thirdly the growth in hours worked.
However, Westpac observed that the contributions from these three components could be at risk of falling over the months ahead as we move past the 'Liberation Day' period as the base of comparison.
Wesptac expects the Reserve Bank of Australia to hold the cash rate until mid-2026, by which time the expected slowing in inflation should be more evident.
"This would enable cash rate cuts in May and August, bringing monetary policy back to broadly neutral levels," Wells added.
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