Westpac's Leading Index Signals Soft but Improving Growth for Australian Economy

The Australian economy showed signs of improvement in August, according to Westpac's Leading Index. The six-month annualised growth rate rose to -0.09% from -0.17% in July, but remains below the long-run trend.

While momentum has improved since mid-year, it still lags behind the +0.26% average pace recorded through most of 2025. Westpac's economists attribute this improvement to a ramp-up in data centre investment and firmer dwelling approvals, which have offset drags from labour markets, financial markets, commodity prices, and consumer sentiment.

Despite these concerns, Westpac has upgraded its year-end annual growth forecast to 1.5%, from a previous estimate of 1%. The bank's economists expect the Reserve Bank of Australia to hold rates at their September meeting but hike again after the October quarterly inflation update, describing this decision as a 'very hawkish hold'.