Westpac Banking Corporation Research Hub

Westpac’s research indicates a softening Australian economy, evidenced by the Westpac-Melbourne Institute Leading Index falling to -0.17% in April, its first back-to-back below-trend reading since early 2024. Despite this loss of momentum, persistent inflation pressures suggest the Reserve Bank of Australia will likely pause in June before resuming policy tightening with a hike in August. A significant 20% slump in the Consumer Expectations Index highlights the domestic strain, serving as the primary detractor from the headline economic rate. Externally, Westpac monitors a volatile global environment where US 30-year yields have surged to 5.20%, their highest levels since 2007, reflecting broader inflationary concerns and a hawkish FOMC stance. Geopolitical instability in the Middle East continues to impact market sentiment, causing fluctuations in energy prices and treasury yields that directly affect Australian financial markets. Furthermore, weak data from China, particularly a sharp slowdown in retail sales growth to 0.2%, signals a persistent loss of momentum in Australia's largest trading partner. Amidst these cross-currents, the AUD has demonstrated periodic resilience in FX markets, even as Australian bond yields rise in response to regional developments.