Westpac and the Melbourne Institute describe their Leading Index as a composite measure which attempts to estimate the likely pace of Australian economic activity over the next three to six months. After reaching a peak in early 2018, the index headed lower through 2018 and into 2019 until it hit a short-term trough in February. That low has now been breached.
The latest six-month annualised growth rate of the indicator has fallen from August’s revised figure of -0.24% to -0.92% in September. Nine out of the last ten readings have been negative.
Index figures represent rates relative to trend-GDP growth, which is generally thought to be around 2.75% per annum. The index is said to lead GDP by three to six months, so theoretically the current reading represents an annualised GDP growth rate of around 1.80% in early-to-mid 2020.