Australia Leading Index Edges Lower

The Westpac–Melbourne Institute Leading Economic Index fell 0.1% month-on-month in September 2026, after remaining flat for the previous two months, marking its first decline since May. Meanwhile, its six-month annualised growth rate held at -0.03%, unchanged from August. The index suggests economic momentum remains slightly below trend heading into late 2026 and early 2027, with growth stabilising at a modest pace rather than stalling. However, higher fuel prices and the RBA’s September rate hike are still filtering through the economy and could weigh on near-term growth. Westpac expects Australia’s economy to expand 1.5% in calendar 2026, below its long-run trend. “For now, it suggests the economy has been stuck in a bit of a holding pattern over the last two years,” said Matthew Hassan, Westpac’s head of Australian macro-forecasting.

The Westpac–Melbourne Institute Leading Economic Index was flat month-on-month in August, unchanged from the previous month. Meanwhile, its six-month annualised growth rate improved to -0.09% from -0.17% in July. Momentum remained soft but has strengthened since mid-year, with the index now only marginally below trend heading into late 2026 and early 2027. Q2 GDP growth showed the Australian economy holding up better than expected despite a global energy shock and higher interest rates. Activity appears to be stabilising at a slow pace rather than stalling, supported by resilient households and a strong ramp-up in data-centre investment. Westpac expects the RBA to raise rates again but, on balance, to wait for the next comprehensive quarterly inflation update on October 28. As a result, the September meeting is likely to deliver a “very hawkish hold.”

The Westpac–Melbourne Institute Leading Economic Index was flat in July after an upwardly revised 0.1% gain in the prior month. Meanwhile, the six-month annualised growth rate improved to -0.2% from -0.4%, though it remained below trend for a seventh straight month. Momentum has firmed modestly since mid-year, pointing to an economy that is soft but not weak, with GDP growth likely to stay positive even as per-capita output hovers near flat. Westpac expects the Reserve Bank to hold rates again in September while stressing readiness to tighten if inflation proves sticky. Head of Macro-Forecasting Matthew Hassan said softer growth signals should reassure the board that demand is gradually aligning with supply, though the moderation also underscores resilience. The key issue remains whether growth slows enough to return inflation to the 2–3% target range in time.