FX.co ★ Australia Leading Index Subdued in May

The Westpac–Melbourne Institute Leading Economic Index was unchanged in May 2026, following an upwardly revised 0.1% increase in April, highlighting subdued momentum. The six‑month annualised growth rate in the Index inched up to -0.17% from -0.18% in April, indicating that activity is likely to run below trend through late 2026 and into early 2027. Although the data do not point to a sharp downturn, the dampening effects of higher interest rates and elevated fuel prices are expected to accumulate gradually.

At its June meeting, the Reserve Bank left rates on hold to assess the impact of earlier tightening and the energy price shock, but cautioned that inflation risks remain tilted to the upside, preserving the option of further rate increases. In line with the signal from the Leading Index, overall growth looks muted, while inflation remains the central bank’s overriding concern. Westpac anticipates that the forthcoming CPI print will stay uncomfortably high, increasing the likelihood of additional policy tightening in the months ahead.