World Economy

Australia Tipped for Moderate Growth

Australia Tipped for Moderate GrowthAustralia Tipped for Moderate Growth

Australia’s economic growth appears to be losing momentum, with promising signs of recovery in the economy now waning, says Westpac’s chief economist.

The dire analysis comes after the Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months in the future, increased to only 0.06% in June, up from a -0.02% in May, Business Spectator reported.

“The change in the growth rate of the index is indicating that the economy appears to be losing momentum through the middle of 2015,” Westpac chief economist Bill Evans said.

In the first four months of the year, the average growth rate was 0.21% above trend–an increase on the average growth rate in the second half of 2014 of -0.66% below trend. However, in the last two months, the growth rate has eased back again, averaging only 0.02% above trend.

Evans said the deviation from trend back to near-zero levels means the promising signs that the economy may be lifting into above-trend territory now appeared to be waning. The signals fit in with Westpac’s forecast for economic growth of around 2.55 in 2015–largely unchanged from the “disappointing” result in 2014, Evans said.

He said the lackluster prints from the index were beginning to challenge the view that 2016 will be a better year than 2014 and 2015.

Evans said it is likely that the Reserve Bank of Australia might start to review their optimistic forecast of economic growth of 3.25% in 2016, in spite of the expected boost to demand from the falling Australian dollar and record low interest rates.