The Westpac-MI Leading Index, which forecasts Australia’s economic activity three to nine months ahead, shifted into positive territory in October, rising from –0.20% in September to +0.26%.
This marks the first significant “above-trend” reading since November 2023 and the strongest result since July 2022.
For much of the past year, the index hovered in negative territory, reflecting sluggish economic momentum.
October’s result suggests a possible normalisation of growth and aligns with Westpac’s forecast of a gradual improvement, with annual growth expected to reach 1.5% by the end of 2024 and 2.4% by late 2025.
Key drivers of the index’s positive shift include improvements in growth expectations and unemployment expectations, contributing +0.17ppt and +0.10ppt, respectively.
These metrics reflect a recent rise in consumer confidence, driven by easing fears of interest rate hikes and optimism about the economic outlook.
“Together, these two index constituents have improved from a collective contribution of –0.10ppt just two months ago to +0.27ppt currently, capturing virtually all current momentum,” said Ryan Wells (pictured above), economist at Westpac.
However, concerns persist about the stability of consumer sentiment, especially if expectations for near-term rate relief are unmet.
Other positive contributors include a steady rise in dwelling approvals (+0.10ppt) and a slight boost from hours worked (+0.02ppt), as the labour market remains strong. Externally, the drag from commodity prices eased significantly, helped by China’s recent stimulus measures, though this effect may fade in coming months, Westpac-MI reported.
While the Reserve Bank is expected to hold the cash rate steady in December, easing labour market pressures and declining inflation will shape future policy decisions.
Whether this growth signals a lasting transition to above-trend activity will depend on sustained improvements across economic indicators, according to the Westpac-MI report.
For more details, read the full report, "Westpac-MI Leading Index October".
Get the hottest and freshest mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
