Strong Growth Ahead For Aussie Economy

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By Rudi Filapek-Vandyck

The Australian economy seems to go from strong to stronger with another leading indicator today signaling continued strong growth lies ahead for the next three to nine months. No surprise thus that Westpac, one of the two owners of the so-called Westpac-Melbourne Institute Leading Index of Economic Activity expects the Reserve Bank to announce another 25 basis points rate hike following the next board meeting on November 7.

Only a surprisingly low inflation reading between now and then can change the above scenario, according to Westpac Chief economist Bill Evans. Westpac expects underlying inflation to come out at 0.8%. The bank believes the surprise CPI read would have to be 0.6% or lower.

The annualised growth rate of the Westpac-Melbourne Institute Leading Index of Economic Activity, which indicates the likely pace of economic activity three to nine months into the future, was 6.1% in August. This is above the index’s long-term trend of 4.1%.

The annualised growth rate of the Coincident Index was 3.1% in August, slightly below its long-term trend of 3.2%.

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