Westpac Index Suggests Australia's Economic Slowdown May Be Stabilizing

Westpac's Leading Index, a key gauge of Australia's economic momentum, has shown signs of stabilizing in July. The index ticked up to -0.2% from -0.4% in June, indicating that the country's slowdown may not be intensifying as previously thought.

The Westpac-Melbourne Institute Leading Index is designed to predict whether growth over the next three to nine months will be above or below the economy's long-run pace. While the latest reading still points to below-trend momentum, it suggests that the Reserve Bank of Australia (RBA) may not need to adjust its policy rate unless inflation stays persistently high.

Matthew Hassan, a Westpac economist, noted that the index has recorded seven consecutive below-trend results, mainly due to tight financial conditions and a cooling labor market. However, other components were mixed, supporting Westpac's base case that the RBA can keep its policy rate on hold.