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Leading index shows economy declining rapidly

by Staff Reporter8 minute read
The Adviser

The Westpac-Melbourne Institute Leading Index of economic growth has fallen to a level lower than that recorded in the early 1990s recessions – pointing to the need for further policies to steer the economy out of trouble.

The Index, which indicates the likely pace of economic activity three to nine months into the future, fell to -5.1 per cent in February, lower than the -3.4 per cent recorded during the 1990s.

The rate of deterioration has also been much more rapid than during the 1990s, with the index reaching -5.1 per cent just four months after falling into negative territory. This compares to the 20 months it took for the index to reach -3.4 per cent in the previous downturn.

Bill Evans, Westpac chief economist, said despite the concerning signals from the index, pre-emptive monetary and fiscal policies should make the current recession less damaging than the one in the 1990s.

He emphasised however that monetary and fiscal policies still had much work to do.

“It would be a mistake... to assume that enough work has been done given this extremely dangerous global economic environment,” he said.


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