Risks are mostly on the downside for growth prospects across the states
The latest Melbourne Institute State Leading Indexes of Economic Activity report shows that the year-ended deviation-from-trend growth rates continued to be well below trend across the states. All the state economies are likely to grow at a below-trend pace in the next three to nine months.
The year-ended growth rates in all the states' Leading Indexes dropped into negative territory (below trend) in November 2022 and, over this period, the yield spread has been the largest detractor from growth. Nevertheless, growth rates have picked up from their low points in April-May 2023, suggesting that the severe impact of the current tightening cycle is probably behind us.
The contributions of the Westpac-Melbourne Institute Expectations and Current Family Finance Indexes indicate that consumers remained very concerned about their family finances and pessimistic about future economic conditions despite the RBA's three consecutive rate pauses. This, coupled with their rising concerns about future labour market conditions, suggests that household consumption is likely to remain weak for some time. Overall, risks are mostly on the downside for growth prospects across the states.
The Melbourne Institute State Leading Indexes of Economic Activity report for August 2023 was released at 11am (AEDT), Thursday 28 September 2023. The report for September 2023 will be released at 11am (AEDT), Thursday 26 October 2023.
The Melbourne Institute State Leading Indexes of Economic Activity are summary measures of the growth prospects of the mainland states. They include state-specific information from a number of markets, such as housing, retail trade and labour, and state -specific information from consumer expectations about activity, unemployment and their assessment of current family finances. These are complemented by financial factors, and commodity prices for the resource intensive states. These indexes assess the likely path of growth relative to trend in three to nine months' time.