Better outlook for the Australian economy later in 2024

Although Australia’s economy is still heading towards a fragile start to 2024., indicators point to a rosier second half of the year.

A surprise shift into positive territory was recorded in future-focused data points collated by Westpac and the Melbourne Institute.

It follows a 15-month run of below-trend readings consistent with an economy slowing in response to rising interest rates and high inflation.

The data index’s six-month growth rate, which indicates the likely pace of economic activity relative to trend, rose to 0.30 per cent in November from a negative 0.39 per cent reading in October.

The unexpected jump to an above-trend reading had been spurred by one-off boosts such as a spike in apartment developments that pushed up dwelling approvals, Westpac senior economist Matthew Hassan said.

These temporary boosts would likely drop out of the indicator in coming months, he said.

“The underlying picture is still of an improvement but one that looks to be more consistent with stabilisation than the beginning of a clear cyclical upturn,” Mr Hassan said.

The underlying picture looks more consistent with stabilisation than an upturn, one economist says.

The economy has been slowing in 2023, with the September quarter national accounts revealing a household sector under pressure from rising mortgage repayments and high living costs.

Consumer spending momentum dropped off again in November, based on an index from Visa Australia.

That index, which captures the number of people in spending mode, fell 1.3 points to 90.6 – its second lowest level since 2019.

Discretionary, non-discretionary, fuel and restaurant spending was all subdued.

Financial pressures are also shifting spending habits in favour of discounted shopping, with nearly half of consumers surveyed by Commonwealth Bank planning to take advantage of Boxing Day sales.

Consumers flocked to the Black Friday sales in November for cheaper goods, and Boxing Day discounts are also likely to be popular based on the bank’s research.