Good news - Australia's leading index of growth is now... less bad

can the economy improve the prime Ministers Fortunes? (Photo:G20 Handout)

Some relatively good news today with the release of the Westpac – Melbourne Institute leading index of economic growth.

The index showed that in the past six months the “deviation in the growth rate of the Index relative to trend has narrowed from –1.01% to –0.27% (+0.74ppts)”.

Of course, that still leaves growth six to nine months out below trend, but it does signal the economy is closing the gap.

Indeed, it’s another partial indicator that appears to have Westpac chief economist Bill Evans backing away from his March rate cut call.

Evans said:

A decision by the Board to delay the next cut to April or May to assess the immediate impact of the February cut on the housing market is a reasonable prospect. The important point, as signalled by the below trend growth in the Leading Index, is that the Australian economy needs more stimulus and the Reserve Bank, with ample scope to cut (by world rather than historical standards) should be acting accordingly.

So the RBA is still going to cut rates. It’s just a matter of when.

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