The Westpac-Melbourne Institute Leading Index, which shows the likely pace of economic activity relative to trend three to nine months into the future, rose to about 0.6% in January from 0.2% in December 2024, according to a Wednesday report.

This is the largest pace of increase since July 2022, around the time of the Reserve Bank of Australia's hiking spree meant to curb rising inflation.

"While the above trend growth pulse is becoming firmer and more convincing, it is still not particularly strong. It remains more consistent with a gradual recovery than a sudden surge," said Tim Robinson, associate professor at Melbourne Institute.

Westpac expects Australian gross domestic product growth to accelerate to 2.2% by year-end from 0.8% over the year to September 2024.