Australia’s main index holds simply above pattern, however momentum is fading as headwinds construct.
Abstract:
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Westpac–Melbourne Institute Main Index held at +0.08% in February (unchanged from January)
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Down from +0.13% in September, signalling moderating momentum
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Development stays barely above pattern however shedding tempo
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Monetary elements (ASX cooling) offset by commodities and hours labored
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RBA charge hikes and Center East battle anticipated to weigh additional
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Westpac sees GDP slowing to ~2.0% in 2026 (from 2.5% in 2025)
Australia’s development outlook is exhibiting early indicators of softening, with the Westpac–Melbourne Institute Main Index holding regular at +0.08% in February on a six-month annualised foundation, unchanged from January however down from stronger readings late final 12 months.
The index, which supplies a information to financial exercise three to 9 months forward, means that momentum stays barely above pattern in early 2026. Nevertheless, the modest tempo of development and up to date trajectory level to a gradual lack of momentum as headwinds start to construct.
The present studying marks a step down from +0.13% recorded in September, with the moderation largely pushed by developments in monetary markets. Specifically, the contribution from the S&P/ASX 200 has weakened considerably, shifting from a constructive +0.19 share factors contribution to broadly impartial. Ahead alerts recommend equities might quickly turn into a drag on the index, reflecting softer market sentiment and tighter monetary circumstances.
Partially offsetting this has been help from increased commodity costs and stronger hours labored, which have helped maintain the index in constructive territory. Nevertheless, these helps might show inadequate as broader macro pressures intensify.
Westpac expects the mix of current rate of interest hikes by the Reserve Financial institution of Australia and the financial fallout from the Center East battle to weigh extra closely on exercise within the months forward. Increased borrowing prices are already starting to constrain demand, whereas elevated vitality costs and world uncertainty are prone to dampen each enterprise and shopper confidence.
In consequence, Westpac forecasts Australia’s GDP development to sluggish to round 2.0% in 2026, down from 2.5% in 2025, a tempo thought of under pattern for the economic system. Whereas early alerts of this slowdown are evident within the February studying, the affect is predicted to turn into extra pronounced in coming months as coverage tightening and exterior shocks absolutely feed by.
Within the present setting, the Main Index underscores a key shift: whereas the Australian economic system has remained resilient, the steadiness of dangers is tilting towards slower development. With monetary circumstances tightening and world uncertainties rising, the outlook is more and more one among moderation reasonably than enlargement.
