Australian Westpac Leading Index Advanced 0.8% in December

An Australian index of leading economic indicators rose in December as the economy strengthened before flooding struck the nation’s northeast.

The index, a gauge of future economic growth, rose 0.8 percent from a month earlier to 280.7, Westpac Banking Corp. and the Melbourne Institute said in Sydney today. The index grew at an annual rate of 4.2 percent in December, after gaining 3.6 percent in November.

Reserve Bank of Australia Governor Glenn Stevens held the benchmark rate at 4.75 percent for a second straight meeting after a quarter percentage-point rise in November. In testimony to a parliamentary panel last week, he said natural disasters in the past two months in the nation’s northeast won’t derail the expansion.

“With inflation softening further in late 2010, a very cautious consumer weighing on demand and the full extent of recent severe weather events still unknown, the Reserve Bank will be strongly inclined to continue its policy pause in March,” said Matthew Hassan, senior economist at Westpac in Sydney. “Westpac does not expect to see the next rate hike until the September quarter.”

Government figures last month showed consumer prices advanced last quarter at the slowest pace in almost two years as a stronger currency lowered costs for goods from abroad.

Westpac’s leading index tracks eight gauges of activity, including company profits and productivity, to give an indication of how the economy will perform over the next three to nine months.

The coincident index, a measure of the current state of the economy, rose to 269.1 in December from 268.3 a month earlier.

To contact the reporter for this story: Michael Heath in Sydney at heath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang in Singapore at sphang@bloomberg.net

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