The Westpac-Melbourne Institute (MI) Leading Index is a composite economic indicator aimed at forecasting future economic activity in Australia. It serves as a crucial tool for investors, policymakers, and business leaders seeking to gain insights into Australia’s economic prospects.

What is the Westpac-MI Leading Index?

The Westpac-MI Leading Index is a composite economic indicator created through a partnership between Westpac Banking Corporation and the Melbourne Institute of Applied Economic and Social Research. This index assesses the anticipated rate of economic activity in Australia, in relation to the long-term trend, for a period of three to nine months ahead.

The components of the Westpac-MI Leading Index include:

• S&P/ASX 200 share price index
• Dwelling approvals
• US industrial production
• RBA Commodity Prices Index (A$)
• Aggregate monthly hours worked
• Westpac-MI Consumer Confidence Index
• Westpac-MI Unemployment Expectations Index
• Yield spread (10Y bond – 90D bill)

The index is computed by calculating a weighted average of these components, with the weights based on each component's historical effectiveness in predicting future economic activity.

How to Understand the Westpac-MI Leading Index

The Westpac-MI Leading Index is presented as a percentage, indicating the deviation of the index from its long-term trend. A positive value suggests that the economy is projected to grow at a quicker rate than the long-term trend, indicating a phase of economic expansion. Conversely, a negative value implies that the economy is expected to grow at a slower rate than the long-term trend, signaling a potential economic slowdown or contraction.

Why is the Westpac-MI Leading Index important?

The Westpac-MI Leading Index is classified as a leading indicator, meaning it typically shifts before the overall economy in Australia. It is an essential resource for businesses and policymakers aiming to monitor the health of the Australian economy. The index can be utilized to forecast future economic growth and inflation, as well as to inform decisions regarding investments and hiring.

Who publishes the Westpac-MI Leading Index?

The Westpac-MI Leading Index is co-published by Westpac Banking Corporation, one of Australia’s largest banks, and the Melbourne Institute of Applied Economic and Social Research, a respected economic research institute associated with the University of Melbourne.

When is the Westpac-MI Leading Index released?

The Westpac-MI Leading Index is released on a monthly basis, typically on the third Wednesday of each month. The data can be accessed via the Westpac website and the Melbourne Institute’s website, as well as through major financial news outlets and data providers. Some providers may require a subscription to access the data.