The Westpac-Now economic tracking tool forecasts second-quarter Australian gross domestic product growth of 0.2% from the previous three-month period, with the final estimate largely unchanged from a previous forecast in July, Westpac said in a Friday report.

It noted that based on historical patterns, the probability of the second quarter being negative remains around 30%.

"Our monthly activity index remains at levels last seen in early 2025, consistent with an economy that remains stuck in the slow lane and growing at the sluggish pace experienced in late 2024 and early 2025," Westpac said.

However, the estimated probability of a contraction in the third quarter has fallen to 9% from 11% in the previous estimate, indicating that conditions are starting to stabilize. Meanwhile, the probability of a technical recession in full-year 2026 has declined to 3.5% from 6% in the previous estimate.

Economic activity appears to be weathering the impacts of the Middle East conflict and higher interest rates better than initially feared, Westpac said.

It added that Australia's central bank will likely feel comfortable with the combination of subdued growth and economic resilience.