Despite strenuous reassurances from the RBA that Australia will weather the current economic crisis a leading index has recorded a sharp plunge in the expected pace of economic growth for the three to nine months ahead.
The Westpac-Melbourne Institute Leading Index recorded a “disturbing” fall from 3.5 per cent in August to just 1.1 per cent in September. This represented the largest fall between two months since the mid 1980s and places growth well below the index’s long-term trend of 3.6 per cent.
Westpac chief economist Bill Evans said yesterday the result signalled a very weak outlook for at least the first half of 2009.
“It is consistent with Westpac’s view that growth in the first half of 2009 will be barely positive with a decent risk that the first two quarters of growth in 2009 could be negative,” he said.
The RBA will likely reduce rates by 0.75 per cent at the December Board meeting, Mr Evans said, with the low point in the current rate cycle to be 3.5 per cent or less.
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