Australian GDP growth is likely to be above 2.75% for calendar year 2017.We are only two months into the year but if the Westpac-Melbourne Institute’s Leading Index maintains its record of being a reliable indicator of the Australian economy’s growth rate over the next three to nine months, GDP growth is likely to be around 3% or higher.
Although the index fell from 1.34% in January to 1.08% in February, this latest reading still suggests the Australian economy is likely to grow above the trend growth rate for most, if not all, of 2017. Trend growth was once taken to mean around 3% but recently the RBA and private sector economists have been suggesting it may mean 2.75%.
The index switched to positive in mid-2016 after fifteen months of negative readings. Westpac chief economist Bill Evans said the index had forecast weakness in the Australian economy through the middle of 2016 and therefore this recent run of positive monthly figures suggests 2017 GDP should be robust. “The latest reads point to above trend momentum carrying through the middle of 2017 consistent with Westpac’s forecast for 3% growth for the full year.”