View Comments
Australian economy slowly improving
Australian economy slowly improving

Australian economic conditions are expected to stay subdued for the rest of the year, although they will improve slowly.

The Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, rose to 2.4 per cent. But that's still below its long-term trend of 2.7 per cent.

The Coincidence Index, an indicator of current activity, was 3.7 per cent. That's above the long-term trend of 3.1 per cent, the private survey shows.

Westpac chief economist Bill Evans said that while economic growth would be moderate in the second half of 2012 and into 2013, conditions would improve.

"Westpac anticipates that more robust growth outcomes for 2013 will require further interest rate relief, particularly given global fragilities and also given the strength of the Australian dollar at a time of weakening global commodity prices," Mr Evans said.

However, he said, it appeared the Reserve Bank of Australian was unlikely to cut the cash rate from its current level of 3.5 per cent after a strong surge in growth in the March quarter.

"That print for first quarter GDP (gross domestic product) was driven by a surge in real consumer spending, partly resulting from the near deflationary conditions which operated during the quarter," Mr Evans said.

Mr Evans said retail spending momentum continued into the June quarter, but that had been supported by the federal government's carbon tax compensation one-off cash payments.

He said he expected the cash rate to stay unchanged until the last three months of 2012.