The West

Economic growth below trend
Economic growth 'below trend'

Australian economic conditions are solid but below average and are likely to stay that way for the coming months.

The Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, rose to 2.2 per cent in July, below its long-term trend of 2.7 per cent.

Westpac chief economist Bill Evans said while the index has recently shown some improvement, it is still below trend.

"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.

"The contributors to the improved growth performance have been: materials prices; productivity; overtime worked; corporate profits; as well as the share market and the real money supply.

"Partially offsetting this improvement was a fall in US industrial production."

The Coincidence Index, an indicator of current activity, was 2.8 per cent, below the long-term trend of 3.0 per cent, the private survey shows.

Mr Evans said the minutes of the Reserve Bank of Australia September 4 board meeting, released on Tuesday, showed the central bank is very close to deciding to cut the cash rate again, following cuts in May and June.

A sharp fall in Australia's terms of trade are behind the RBA's current unease about growth prospects for Australia and the global economy, he said.

Mr Evans said he expects the RBA to hold off until November to cut the cash rate from its current level of 3.5 per cent.

"We also retain our expectation that there will be follow up moves in December and the March quarter," Mr Evans said.

The West Australian

Latest News From The West

Qantas and the operators of Perth Airport are poised to strike a deal within days to allow the first non-stop flights from Australia to Europe through the airline’s domestic terminal.

The victim of the Carlisle siege is suing the estate of the man who took her hostage at knife-point in a bid to get compensation for the permanent injuries she suffered during the deadly police …

The children of Perth’s most recent fatal shark attack victim have broken their silence to reveal they want people to be put first to stop other families suffering the pain inflicted on their …

Struggling West Australians are putting so much pressure on Foodbank to put meals on the table the food relief group has to nearly quadruple its fundraising income — and corporate WA will soon be …

Popular videos

Our Picks

Follow Us

More from The West