More than a few respected economists are forecasting further rate cuts by the RBA in 2017. Employment growth is patchy and inflation is low. However, according to the Westpac-Melbourne Institute’s Leading Indicator index, economic growth is expected to remain above trend for the next three to nine months. Although the index fell from 1.36% in December to 1.30% in January, any reading above zero indicates above-trend growth. Given the index suggests the likely pace of economic activity three to nine months in the future, this latest reading implies the Australian economy is likely to grow through 2017.
Westpac chief economist, Bill Evans said, “However, the run of six consecutive above or at trend readings is signalling a better outlook for the first half of 2017. In particular, whereas over the September–November period the Index had been losing momentum, albeit still in positive territory, the December and January results represent a very strong rebound. Westpac concurs with the forecast of the Reserve Bank of 3% growth through 2017.”