Australians are expected to get a little more footloose and fancy-free with their cash over the next six months, giving the economy a shot in the arm.
Still, the latest Westpac/Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, suggests economic growth will remain below trend into the first half of 2015.
Westpac chief economist Bill Evans says the index results are consistent with the Reserve Bank's forecasts for where the economy is headed.
But he's a little more upbeat.
"Westpac is more optimistic around the growth outlook than the Reserve Bank," Mr Evans said.
"Partly consistent with the signal from the Leading Index, we expect below-trend growth in the second half of 2014 but at a three per cent annualised pace rather than the two per cent implied by the Reserve Bank's forecast."
Mr Evans said he expected consumer spending to lift in the second half of 2014, and continue to strengthen through the first half of 2015.
"That is consistent with our more upbeat view on the first half of 2015 than implied by the Index," he said.
"We expect that growth momentum in the economy can lift to a trend 3.25 per cent pace in the first half of 2015, whereas the Index is clearly pointing to a below-trend performance for the economy in the first half of 2015."
Mr Evans said the Index in September had experienced its largest negative deviation from trend since December 2011, when the RBA began cutting rates.
"The Leading Index is indicating that the lift to momentum which was eventually delivered as a result of the rate cuts appears to have dissipated," he said.
Westpac economists expect the RBA will begin raising rates in August 2015.
Share
