Australia’s economy is bracing for continued “sub-par growth” into 2024, as indicated by the downturn in the Westpac Leading Index, which dipped from -0.01% to -0.25% in January. Westpac anticipates the economic growth rate to hover around an annualized 1.3% in the first half of this year, marking an improvement from the latter half of 2023’s 0.8%, yet remaining significantly below the usual trend rate of about 2.5%.
In the realm of monetary policy, Westpac’s analysis suggests a measured approach by RBA. The central bank is expected to take additional time to gain “sufficient confidence” that inflation will revert to target range within a reasonable timeframe. Economic indicators leading up to the March meeting are projected to reinforce a narrative of “weak growth and demand environment domestically,” which would justify RBA’s decision to maintain its current policy stance.
This cautious period of observation is likely to precede any shift towards a more definitive “on hold” position by the Board, with considerations for interest rate cuts anticipated to emerge further down the line.
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