Australian economy to remain sluggish for most of 2015

by Julia Corderoy19 Feb 2015
The Australian economy is expected to grow at a below trend pace of 2.75% for most of 2015, according to the latest survey conducted by a major bank.

The Westpac Melbourne Institute Leading Index, which indicates the likely pace of economic growth three to nine months into the future, lifted just 0.3% in January.

Westpac’s chief economist, Bill Evans says growth in the Index has now been below trend for twelve consecutive months, which indicates our economy will remain sluggish for most of the year ahead.

“That signal continues to point to below trend growth for much of 2015. That outlook accords with Westpac’s own forecasts with our expectation that growth through most of 2015 will be running at around a 2.75% pace, below the trend growth pace of around 3.25%,” he said.

“That forecast is based around another 0.25% rate cut over the next few months and an Australian dollar which will bottom at around USD 0.75 by mid-year.”

The economy is likely to be dragged down by weak growth in business investment, which will also continue to drive the decade high unemployment level.  

As such, Evans believes another cut by the Reserve Bank next month is the best policy to support domestic demand and maintain downward pressure on the AUD.