21.02.201801:28:00UTC+00Australia's Westpac-Melbourne Leading Index Falls In January

Australia's leading index that signals the likely pace of economic activity in future dropped at the start of 2018, data from the Westpac Institutional Bank showed Wednesday.

The six month annualized growth rate in the Westpac-Melbourne Institute Leading Index fell to 0.73 in January from 1.39 in December.

Most of the volatility in the index over the last two months can be explained by dwelling approvals, Westpac's Chief Economist, Bill Evans said.

"Nevertheless the Index is still registering a comfortably above trend reading and, following the solid results in October and November, points to above trend growth in the early part of 2018," Evans added.

However, Evans said there are still key negatives around housing, household incomes and the consumer that are likely to challenge the sustainability of any upswing in 2018.