An Australian leading economic index indicates the nation's economic expansion will modestly accelerate in 2025, but overall the anticipated growth rate is "lackluster."

The six-month annualized growth rate indicated by the December Westpac-Melbourne Institute (W-PI) Leading Index, which predicts the pace of economic activity relative to trend three to nine months into the future, "stayed in positive territory in December, albeit easing a touch to 0.25% from 0.33% in November," said W-MI, on Wednesday.

By the end of 2025, Australia's gross domestic product (GDP) should be expanding at a "2.2% on-year (rate)...a material improvement on the dismal 0.8% on-year pace seen over the year to September 2024, but still a lackluster result," advised W-MI.

As of December, boosting the outlook for the Australian economy for 2025 were stabilizing commodity prices, less pessimistic expectations amongst Australian consumers, a rally in equity markets, and a recovery in dwelling approvals (building starts) from cyclical lows, said W-MI.

While prospects are for a modest increase in the expansion rate of the Australian economy, the outlook is hardly certain, said W-MI. "All of these component gains have been relatively modest to date. There are also doubts over the extent to which they will be sustained into 2025. Commodity prices and financial markets face significant risks around global trade and geopolitics," said W-MI.

In addition, Australian consumer and housing markets are not robust and could be limited by relatively high interest rates, added W-MI.

"All up, the more positive growth signals still look fairly tentative," according to the W-MI report.

A more-accommodative or stimulative monetary policy from the Reserve Board of Australia (RBA), that might help economic growth, may come in 2025 but not soon, said W-MI.

The RBA's next policy meeting is slated for February 17-18.

The RBA "is becoming more confident about achieving a sustained return to inflation in the 2% to 3% target band. A further moderation in inflation is expected to eventually clear the way for less restrictive interest rate settings. However, Westpac expects the RBA to keep the official cash rate on hold in February, with an easing more likely to commence in May," said W-MI.