Oz Economic Prospects Continue To Look Good

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By Rudi Filapek-Vandyck

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, registered 5.8% in September, above its long term trend of 4.3%.

Westpac and Melbourne Institute report the annualised growth rate of the Coincident Index was 4.4% which is also above its long term trend of 3.7%.

The economists believe key drivers of the upbeat outlook are consumer spending supported by strong employment growth and ongoing business investment.

The level of the Leading Index increased by 1.9 points in September (0.8%) with all four monthly components of the index increasing: dwelling approvals (up 6.8%); share prices (up 5.1%); the real money supply (up 1.3%); and US industrial production (edged 0.2% higher).

Strong contributors to the annual growth rate of the Leading Index are the real money supply and US industrial Production, the economists point out, with company profits and the share market also making “healthy” contributions.

The level of the Coincident Index increased by 0.8 points (0.3%). Retail sales (up 0.6%) and employment (up 0.1%) increased in the month, while the unemployment rate fell (down 0.1ppts).

Westpac does not think the Reserve Bank (RBA) will increase official interest rates further in December, but the bank does anticipate hikes of 50 basis points in the first half of calendar 2008.

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