AUSSIE BONDS: May-30 Supply Goes Well, Strong Demand

The Westpac lead index for December fell 0.02% m/m after rising 0.06% leaving the 6-month annualised rate slightly slower at 0.25% from 0.33%. This measure leads growth relative to trend by 3 to 9 months and it was positive throughout Q4 signalling some improvement in growth over H1 2025. Westpac expects GDP growth to reach 2.2% y/y by end-2025 but the first rate cut not until May.

• The improvement in the index from mid-last year has been driven by better consumer confidence, commodity prices in AUD, stronger equities and turnaround in dwelling approvals. The outlook for commodities and markets in 2025 is highly uncertain thus risking the pickup in the Westpac lead index.
• The market has almost 75bp of rate cuts priced in by year end which should support the economy-related variables in the index but the timing continues to be data-dependent and unclear.
• Westpac says that “the more positive growth signal still looks fairly tentative”, but the RBA will want to see signs of the labour market easing, whereas it stabilised in H2 2024 and some indicators even tightened, such as underemployment. It notes that there is still a chance of a February or April easing if core inflation moderates significantly more than expected.

Australia Westpac lead index vs real GDP %

• MNI: UK OCT-DEC MEDIAN PAY AWARDS +3.3% :Brightmine

• Brightmine median basic pay awards in the 3 months to December dropped to 3.3%, this is the second consecutive softening in pay awards following median rewards remaining at 4.0% between July and October 2024.
• The press release notes, "the combination of rising NICs and ongoing economic pressures is likely to result in a decrease in 2025 pay awards compared to the median increase of 4.5% recorded in 2024."
• On 2025, from analysis of 29 settlements to date, Brightmine estimates median pay awards of 3.5% for January 2025, and 3% for the whole of 2025 (from median prediction amongst 289 organisations), this is down from a median pay award for 2024 at 4.5%.
• Note that this is also at the bottom end of the initial findings from the BOE's Agents which suggested in the December MPC Minutes that average 2025 pay awards will be between 3-4%. This would likely therefore be encouraging data for the doves on the MPC.
• The rolling quarter of Brightmine data is based on 12 pay awards that came into effect to the end of December 2024, representing around 3,000 UK employees (down from 22 pay award covering 227,000 employees in November).