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Economic outlook slow but recovery around the corner

Alexandra Vanags
24 September 2021 1 minute readShare
Westpac

Economic activity will continue to slow before making a recovery and rebounding in 2022, according to the Westpac-Melbourne Institute Leading Index.

The index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, saw the six-month annualised growth rate fall from 1.4% in July to 0.5% in August.

Senior economist at Westpac Bill Evans said the index “has held up surprisingly well during this downturn, but it seems likely that there is more weakness on the way”.

Westpac expects the economy to contract by 4% in the September quarter, then show a modest 1.6% recovery in the December quarter as the NSW and Victoria lockdowns are eased. From there, it will build to a 7.4% growth surge in 2022.

“By December, we would be expecting to see signs of this recovery in the Leading Index as it paves the way for a very strong rebound in 2022, highlighted by a 5.6% lift in the first half of the year,” Mr Evans said.

The Leading Index growth rate has fallen abruptly over the last five months, from 3.43% in March to just 0.54% in August.

Economic outlook slow but recovery around the corner
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Alexandra Vanags

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