Australian economy, post mining boom, 'slowed abruptly' over last six months

http://www.theguardian.com/world/2013/oct/16/australian-economy-post-mining-boom

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The Australian economy has suffered a significant loss of momentum since the start of the year as its transition away from being a mining investment gets bumpy.

The Westpac/Melbourne institute leading index, which indicates the likely pace of economic activity three to nine months into the future, was 3.2% in August, down from 4% in July but marginally above its long-term trend of 2.9%.

The coincident index, which gives an indication of current economic conditions, was 2.4% above its long-term trend of 2.9%.

"Although the growth rate in the leading index remains slightly above trend, it has slowed abruptly over the last six months," Westpac’s chief economist, Bill Evans, said.

"Some months ago the index was pointing to significantly above trend growth in 2013 but this current slowdown is more consistent with Westpac's growth forecasts."

Evans said Westpac was not expecting the Reserve bank to cut the cash rate at its November 5 board meeting after reducing it to a new record low of 2.5% in August.

Westpac's forecast is for a 0.25 percentage point cash rate reduction in February and another in May.

"The loss of momentum evident in today's leading index report suggests the RBA's 25 basis point rate cut in August was a timely shot in the arm for growth," Evans said.

"However, we expect further boosts will be required to support momentum through the difficult transition from mining to non-mining led growth."

Westpac expects the Australian economy to grow by 2.5% in 2013 and by 2.3% in 2014.

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