Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

A pointer to the future performance of the Australian economy suggests annual growth will hold just above the long-term average, despite an expected jolt to activity from lockdowns in the two biggest states.

The Westpac-Melbourne Institute leading index, which indicates the likely pace of economic activity three to nine months into the future, fell in August but suggests annual growth will remain above trend of around 2.8 per cent.

“The leading index has held up surprisingly well during this downturn but it seems likely that there is more weakness on the way,” Westpac chief economist Bill Evans said on Wednesday.

The index fell from 1.4 per cent in July to 0.5 per cent in August.

Mr Evans expects weakness in components of the index, such as falling commodity and stock prices, will weigh on the index in September.

Westpac expects the economy to contract by four per cent in the September quarter as a result of lockdowns in NSW and Victoria, before making a modest 1.6 per cent recovery in the December quarter as restrictions are eased.

“By December we would be expecting to see signs of this recovery in the leading index as it paves the way for a very strong rebound in 2022,” Mr Evans said.

Westpac expects growth to surge by 7.4 per cent next year.

In a recent speech, Reserve Bank of Australia governor Philip Lowe warned the economy could contract by at least two per cent in the September quarter.

The minutes of the RBA’s September 7 board meeting, released on Tuesday, predicted the rebound once COVID-19 restrictions are eased could be slower than experienced when previous lockdowns have ended.

This would be the result of consumers and businesses being more cautious after lengthy shutdowns.

The impact of restrictions is clearly being felt in the labour market, which saw 146,300 jobs lost in August.

The National Skills Commission confirmed job advertising on the internet fell by 5.6 per cent in August, the third consecutive monthly decline after a 12-year high in May.

The data – a pointer to future employment growth – recorded the biggest fall locked down NSW, down 9.2 per cent, followed by a nine per cent drop in jobs ads in the ACT. Victoria and Queensland both fell by 5.9 per cent.

All eight occupational groups monitored by the commission fell in August.