Melbourne's leading Index growth rate remains below trend

Growth in Melbourne's Leading Index has now been below trend for the last five months. The June quarter national accounts confirmed that Australia's six month annualised growth slowed to a 2.1% pace in the first half of 2015 with the forecast for the second half of a still below trend 2.5%. 

"Looking further out the growth in 2016 is forecasted at 2.75%. With trend growth in the economy now likely to be nearer 2.75% than 3% our forecast for GDP growth in 2016 of around trend growth looks a little vulnerable based on this current run of below trend growth rates for the Leading Index", says Westpac. 

The Leading Index gives a guide into the likely momentum in the economy through the final quarter of 2015 and into the first half of 2016. 

"Key factors behind these current expectations of a modest lift in the growth pace in 2016 are, a lift in consumer spending growth from 2.5% in 2015 to 3.0% in 2016, a modest improvement in non-mining investment and an increased contribution from net exports (adding 1.3ppts to GDP growth, up from 0.8ppts in 2015)", added Westpac. 

These positive factors will be partly offset by a slowdown in dwelling investment from 10.0% to 2.2% as the residential building boom reaches its peak.