While NAB chief economist Alan Oster thinks the economy will weaken in 2017/2018, the latest Westpac-Melbourne Institute Leading Index suggests otherwise. August’s reading was released today showing a return to above–trend growth. The Leading Index figure moved from –0.01% in July to +0.20% in August and they are the first set of positive numbers in over a year.
The report, as with most economic news in recent days, has been overshadowed by a focus on September meetings of the Bank of Japan and the FOMC. However, the Leading Index provides a measurement of Australia’s likely rate of economic growth for the next three to nine months, relative to trend, and it is one of several important private sector estimates which provide markets with clues as to economic conditions in the short term.
The latest figures continue a pattern of rising numbers which has been present through all of 2016 and, according to Westpac’s chief economist Bill Evans, the figures suggests Australian GDP “is likely to continuing growing around its long run trend rate of about 3% a year.” The trend rate of economic growth in Australia has been traditionally estimated to be 3% per annum but in recent years some economists have suggested it may have moved closer to 2.75%.
