Australia looks set to enjoy solid economic growth for the rest of what has been a traumatic year, rebounding smartly from the first recession in nearly three decades.
The Westpac-Melbourne Institute leading index, which indicates the likely pace of economic growth three to nine months into the future, saw its strongest rise since the early 1980s.
It also pointed to above-trend economic growth – around 2.75 per cent – for the first time since November 2018.
“Developments in the index are consistent with Westpac’s view that growth in the Australian economy will be significantly above trend in both the September and December quarters,” Westpac chief economist Bill Evans said.
This will following the steep seven per cent contraction in the June quarter.
The September quarter national accounts are due on December 2.
However, Mr Evans expects the momentum will slow in 2021 as the sharp initial improvement in activity due to the easing of domestic restrictions ends.
“The challenge to growth momentum will emerge from the June quarter as JobKeeper supports are removed, temporary loan repayment deferrals continue to roll off and other temporary measures to cushion the impact of the COVID shock have been removed,” he said.
Other data on Wednesday is expected to show wage growth has slumped to a record low because of the spike in unemployment.
Economists expect the September quarter wage price index – a key measure of wages growth used by the Reserve Bank and Treasury – will have risen by just 0.1 per cent.
This will leave the annual rate at a mere 1.4 per cent, the slowest pace since the Australian Bureau of Statistics began the series in 1998.
It compares with 1.8 per cent as of June.
In a speech delivered this week, Reserve Bank governor Philip Lowe said for inflation to return to the two to three per cent target band and warrant a rise in interest rates, wage growth would need to be materially higher.
“This will require significant gains in employment and a return to a tight labour market,” he said.
The Department of Education, Skills and Employment will also release its vacancy report for October on Wednesday.
In September, the number of job advertisements posted on the internet jumped 6.4 per cent to 144,000 ads, around double the amount seen in April when the pandemic took its toll on the economy.
However, job ads were still down 12.2 per cent on the year.