Westpac Leading Index

Data Macro

Source: Westpac
Source Link: https://www.westpaciq.com.au/
Frequency: Monthly
Next Release(s): March 18th, 2026 7:00 PM

Latest Updates

The six-month annualised growth rate in the Westpac–Melbourne Institute Leading Index slowed to +0.02% in January from +0.44% in December, signaling growth momentum stalling into 2026.
- Momentum moved from slightly above trend back in line with trend, indicating the late‑2025 pickup has faded at the start of 2026.
- Compared with six months ago, the growth rate moderated 0.17ppts from +0.19% in July to near‑flat +0.02%, pointing to a broader loss of momentum.
- Consumer expectations shaved 0.16ppts and dwelling approvals cut 0.23ppts, showing the slowdown is concentrated in consumer and housing channels.
- Commodity prices added 0.36ppts over six months, but AUD strength trimmed the boost, suggesting external support may be waning.
- Westpac expects GDP growth to hold around 2.5% in 2026, implying a near‑trend pace despite the softer leading signal.
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The six-month annualised growth rate in the Westpac–Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, nudged up to +0.42% in December from +0.20% in November.

The latest update is broadly consistent with 2025’s recovery carrying into 2026. However, the momentum is still not all that convincing with the Index growth rate only modestly above trend, having stalled through the middle of last year. An outright strong growth pulse, associated with Leading Index growth rate reads of over 1%, still looks to be a long way off. Westpac expects the Australian economy to grow by 2.4% this year, a result that we would see as being roughly around trend.

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The six-month annualised growth rate in the Westpac–Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, slipped back to +0.16% in November from +0.32% in October.

The Leading Index has pared back from a brief stint in slightly above-trend territory, largely reflecting the recent sell-off in share markets and a cooling in consumer expectations. While the Index remains in positive territory, it is fairly subdued and indicative of some stalling in momentum. Westpac expects that activity will only pick up slightly from here, from 2.1%yr currently to 2.4%yr over 2026, which Westpac views as being roughly around trend.

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The six-month annualised growth rate in the Westpac–Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, moved into slightly positive territory in October, lifting to +0.35% in October from +0.10% in September.

After oscillating around a zero reading for the past six months, the Leading Index has built up some momentum heading into year-end, with the October update pointing to growth running at a slightly above-trend pace in early 2026. While the growth signal is not particularly strong, it is consistent with Westpac’s view that activity will continue to pick up steam over the rest of this year and into next, with GDP growth forecast to rise from 1.8%yr currently to 2.4%yr over 2026. Westpac views this as roughly around-trend, with the current slightly-above-trend momentum evident in the Leading Index expected to encounter some headwinds as we enter the new year.

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Australia’s Westpac–Melbourne Institute Leading Index rose to +0.04% in September 2025 (from -0.16% in August), nudging back above trend and suggesting near-trend growth momentum heading into early 2026.
- The Index has slowed from a peak of +0.83% in February to around zero since June, reflecting fading momentum but continued stability around trend levels.
- Over the past six months, the Index growth rate moderated by -0.44 ppts, mainly due to weaker dwelling approvals (-0.24 ppts) and lower commodity prices (-0.21 ppts).
- Reduced support from the yield spread and consumer sentiment components subtracted -0.39 ppts since March, showing persistent caution among households.
- Offsetting factors included a 12.8% rally in the S&P/ASX200, which added +0.32 ppts to overall Index growth.
- Westpac projects GDP growth of about 2% in 2025, rising to a trend pace in 2026, supported by gradual recovery in housing and commodity sectors.
- The RBA next meets on November 3–4, with Westpac expecting the next move to be a rate cut, contingent on CPI and labor market data.
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Australia’s Westpac–Melbourne Institute Leading Index fell to –0.16% in August (from +0.11% in July), marking the first below-trend reading since September 2024 and pointing to slowing economic momentum.
- The Leading Index has declined from a peak of +0.86% in February to –0.16% in August, a swing of just over –1 ppt.
- Four main components drove the slowdown: consumer unemployment expectations (–0.34 ppts), commodity prices in AUD (–0.25 ppts), consumer expectations (–0.22 ppts), and dwelling approvals (–0.19 ppts).
- Additional drags came from the yield spread, US industrial production, and total hours worked, which together subtracted –0.18 ppts.
- The only positive contributor since February was the equity market, with a 10% rally in the ASX200 adding +0.16 ppts.
- June quarter GDP rose 0.6% QoQ and 1.8% YoY, supported by firm consumer spending, though boosted by temporary one-off factors such as public holidays and end-of-year sales.
- Westpac projects GDP growth of 1.9% in 2025 (vs 1.3% in 2024), still slightly below trend, with growth expected to normalize by 2026.
- The RBA is expected to hold the cash rate at 3.6% in September, with Westpac anticipating a 25 bp cut in November and two more in 2026 as growth slows and inflation remains contained.
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The Westpac–Melbourne Institute Leading Index six-month annualised growth rate edged up to 0.12% in July (prev 0.01%), but momentum remains subdued and well below the 0.61% start to the year.
- Commodity prices were the largest drag, subtracting –0.25 ppts from the Index since January due to falling USD commodity prices and a stronger AUD.
- Labor market indicators also weighed, with declining total hours worked and softer consumer expectations cutting –0.22 ppts from growth.
- Dwelling approvals and unemployment expectations improved in July but remained weak for much of 2025.
- Financial markets contributed modest support, with the ASX200 recovery and a slightly steeper yield curve adding +0.13 ppts since January.
- Westpac projects GDP growth of 1.7% in 2025 (vs 1.3% in 2024), returning to a 2.2% trend pace only by end-2026.
- The RBA is expected to hold rates at its September meeting, with a further 25 bp cut anticipated in November as easing continues gradually.
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The Westpac–Melbourne Institute Leading Index six-month annualised growth rate slowed to 0.03% in June from 0.11% in May, signaling that Australian economic activity is trending flat and losing momentum.
- The index has declined steadily from 0.33% in December 2024, dragged down by weaker commodity prices (-0.24 ppts) and softer labor market indicators (-0.28 ppts).
- Dwelling approvals and consumer unemployment expectations remained weak, while financial markets and US industrial production provided modest support.
- Westpac expects GDP growth of just 1.7% YoY in 2025, slightly better than 2024’s 1.3% but well below the long-term average.
- The RBA held rates steady in July, but Westpac forecasts a 25 bp cut in August if the upcoming Q2 CPI print is benign.
- Further rate cuts are anticipated in November and into early 2026 as part of a gradual easing cycle.
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The Westpac–Melbourne Institute Leading Index six-month annualised growth rate fell to -0.08% in May from 0.19% in April, marking its first below-trend reading since September 2024.
- Domestic drags now outweigh external ones, led by declining dwelling approvals (-0.21 ppts) and slower growth in hours worked (-0.13 ppts).
- Consumer sentiment and unemployment expectations also subtracted a combined -0.24 ppts from the index.
- Financial markets contributed negatively, with the S&P/ASX200 subtracting -0.16 ppts, though some improvement is expected near term.
- US industrial production was the main positive, adding 0.29 ppts, though future gains are likely capped by global trade frictions.
- Westpac forecasts GDP growth of 1.7% YoY by end-2025 and expects the RBA to hold rates in July before a possible cut in August.
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The Westpac–Melbourne Institute Leading Index six-month annualised growth rate slowed to 0.2% in April from 0.5% in March, signaling a loss of above-trend momentum as external and sentiment-driven pressures weigh on the outlook.
- The Index is now flat compared to six months ago, with five of eight components weakening.
- Biggest drags came from consumer expectations (-0.23 ppts), equities (-0.12 ppts), and unemployment expectations (-0.10 ppts).
- Dwelling approvals and total hours worked also combined to subtract 0.10 ppts from the growth rate.
- Offsetting positives over the period included commodity prices (+0.24 ppts), US industrial production (+0.17 ppts), and the yield spread (+0.15 ppts), though all have lost steam recently.
- Westpac expects GDP growth to reach 1.9% YoY by end-2025; the RBA is expected to keep policy on hold at its July 7–8 meeting pending the next inflation update.
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The Westpac-Melbourne Institute Leading Index six-month annualized rate slowed to 0.6% in March, down from 0.9% in February.
- The Leading Index growth rate has lifted from –0.24% in September last year to +0.63% currently.
- Four of the eight components have driven the 0.87 ppt improvement: commodity prices adding 0.42 ppts, a widening yield spread adding a further 0.34 ppts, improving US industrial production adding a further 0.15 ppts and improving consumer expectations for jobs adding another 0.12 ppts.
- Westpac expects growth to track a slower recovery, lifting to 1.9% in 2025 revised down from a previously forecast 2.2%.
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The six-month annualised growth rate in the Westpac–Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, lifted to 0.8% in February from 0.6% in January.
- The above-trend growth pulse has continued to firm a little but remains consistent with a gradual recovery rather than a sudden surge.
- Westpac expects GDP growth to track a slow rise over the course of 2025, reaching 2.2%yr by year-end. While that would be a material improvement on the 1.3% yr gain seen in 2024, it implies a relatively subdued performance by historical standards.
- Australia’s growth typically tracks in the 2.5–3% range, about 1ppt above population growth.
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