Australia Leading Index Muted

The Westpac–Melbourne Institute Leading Economic Index edged lower 0.1% month-on-month in January 2026, reversing a 0.1% rise in the previous month. More notably, the six-month annualized growth rate slowed sharply to 0.02% from 0.44% in December, indicating that the slightly above-trend momentum seen in the second half of 2025 has faded in early 2026. Despite the softer signal, Westpac still expects GDP growth to hold at 2.5% this year, close to its estimate of trend growth and broadly consistent with the index’s latest reading, which points to steady rather than accelerating activity. On monetary policy, while a near-term follow-up cash rate hike cannot be ruled out, the board is more likely to adopt a cautious stance, waiting for additional data before tightening further. The central bank’s next meeting is scheduled for March 16–17.

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.