The Westpac Leading Index, which signals the economic trajectory for Australia, indicates that the country is experiencing a prolonged period of subdued growth despite healthy population expansion. The index fell marginally by 0.03% month-over-month in October, following an increase of 0.06% in the previous month. This minor decline contributes to a 15-month trend of negative figures, with the latest reading at -0.40%.
Key factors influencing this trend include a wider yield spread and stable dwelling approvals, alongside rising commodity prices in Australian dollars. However, these positive contributions are being offset by a decrease in hours worked and a lackluster performance from ASX-listed equities.
Despite this ongoing phase of below-trend growth, the six-month annualized growth rate remains slightly positive at -0.4%, hinting at continued economic expansion into mid-2024. This aligns with the Reserve Bank of Australia's (RBA) projections, which forecast modest economic growth of 1-2%, falling short of potential trends. The country's population growth stands at a robust 2.4%, yet it has not translated into a significant economic upturn.
The RBA remains focused on aligning inflation with its end-2025 target, which is set between 2-3%. The central bank's November meeting minutes revealed a stringent approach towards achieving this goal in a timely manner. With critical policy decisions expected in the upcoming year, all eyes are on the RBA's future meetings as they may introduce changes to navigate the economic challenges ahead effectively.
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