Australia Leading Index Inches Higher

The Westpac–Melbourne Institute Leading Economic Index for Australia edged up 0.1% month-on-month in December 2025, following a flat reading in the previous month. Meanwhile, the six-month annualized growth rate rose to 0.42% from 0.20% in November, suggesting that the economic recovery seen through 2025 is carrying into early 2026. However, the improvement remains tentative, as the index is only modestly above its long-run trend and had stalled through the middle of last year. Head of Australian Macro-Forecasting Matthew Hassan noted that a clearly strong growth pulse, typically signaled by Leading Index growth above 1%, still appears some way off. Westpac expects the Australian economy to grow 2.4% this year. On the monetary front, the central bank is widely expected to keep the cash rate unchanged at its February meeting. Still, policymakers remain alert to inflation risks and have laid the groundwork for potential rate hikes should price pressures re-emerge.

The Westpac–Melbourne Institute Leading Economic Index for Australia was flat on the month in November 2025, following a 0.1% rise in the previous month. Meantime, the six-month annualized growth rate eased to 0.16% from 0.32% in October, signaling slower momentum three to nine months ahead. The index has retreated from a brief period above trend, reflecting equity market weakness and softer consumer sentiment. While still positive, the reading points to subdued activity. Westpac forecasts growth to edge up only modestly, from 2.1% yoy currently to 2.4% in 2026, broadly in line with trend. Economist Ryan Wells noted inflation is expected to moderate next year, but the central bank’s hawkish stance has delayed prospects for policy easing until 2027. Upside inflation surprises could revive the risk of a rate hike, while a sharper-than-expected labor market slowdown might bring forward rate cuts.

The Westpac–Melbourne Institute Leading Economic Index for Australia edged up 0.1% month-over-month in October 2025 after a flat reading in the previous month. The six-month annualized growth rate also improved, rising to 0.35% from 0.1%. After hovering around zero for much of the past six months, the index has begun to show modest momentum heading into year-end, with the October update indicating slightly above-trend growth in early 2026. Although the signal is mild, it aligns with expectations that activity will continue to strengthen through the rest of 2025 and into next year. Westpac economist Ryan Wells forecasts GDP growth to pick up from 1.8% currently to 2.4% in 2026. On interest rates, Westpac expects the RBA to keep the cash rate on hold until mid-2026, by which time easing inflation should be more evident. This would allow for potential rate cuts in May and August, returning policy to broadly neutral settings.