Westpac and the Melbourne Institute describe their Leading Index as a composite measure which attempts to estimate the likely pace of economic activity relative to trend in Australia. The index combines certain economic variables which are thought to lead changes in economic growth into a single variable. This variable is claimed to be a reliable cyclical indicator for the Australian economy and an indicator of swings in Australia’s overall economic activity.
Since October, the Leading Index has returned values which implied above-trend growth in the near future. Despite a series of yoyo-like rises and falls in the first quarter of 2018, the index is still in positive (above-trend) territory. The six month annualised growth rate of the indicator dropped from a revised +1.43% to +0.69%. These figures represent growth rates above trend-GDP growth, which is generally thought to be around 2.75% per annum for Australia.
