Australia's economy faces prolonged weakness: Westpac

21 Sep '23

2 min read

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Despite a slight improvement from minus 0.56 per cent in July 2023 to minus 0.50 per cent in August 2023, Australia's economic outlook remains bleak, according to the Westpac-Melbourne Institute Leading Index.
Chief economist Bill Evans warns of the country's continued economic weakness, expecting growth of less than 1 per cent through June 2024.

The Westpac-Melbourne Institute Leading Index, which gauges the likely pace of Austalia’s economic activity for the next three to nine months, has shown a slight uptick, moving from minus 0.56 per cent in July 2023 to minus 0.50 per cent in August 2023. Despite the minor improvement, the outlook remains grim, as per Westpac's chief economist, Bill Evans.

“The economy continues to move through an extended period of weakness,” Evans said in a media release.

He highlighted that the leading index has remained in negative territory for just over a year, indicating that the economy is growing at a below-trend pace.

The string of negative prints, starting in August of the previous year, accurately predicted the economy's downturn in 2023. The economy expanded at an annualised pace of 1.6 per cent over the March and June quarters, which is well below the trend growth closer to 3 per cent per year.

Westpac projects that this lackluster performance will continue into the next year. Economic growth is expected to be less than 1 per cent for the year up to June 2024. However, Evans suggested there may be ‘some upside risks’ to this prediction, given that population growth is anticipated to exceed 2 per cent in 2023.

Despite the potential for population growth to positively impact the economy, Evans warned that economic growth is still likely to trail behind it. This pattern was observed in both the March and June quarters this year, during which GDP per capita contracted by 0.3 per cent.

Although the leading index has seen a minor lift since the start of this year, moving from minus 0.73 per cent in February to its current minus 0.50 per cent, the improvement of just 0.24 percentage points does little to alleviate concerns about the Australian economy's recovery.

Fibre2Fashion News Desk (DP)

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