Economic growth this year looks set to accelerate at a faster pace than predicted by the Reserve Bank, keeping pressure on the central bank to raise interest rates again.
The annualised growth rate of the Westpac-Melbourne Institute leading index for February released on Wednesday was 7.2 per cent, well above its long-term trend of 2.8 per cent.
The index, which indicates the likely pace of economic activity three to nine months into the future, grew at its fastest pace since 1997, having accelerated from just 2.0 per cent in the past six months.
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"It is signalling that growth in the Australian economy will accelerate through 2010 to well above trend by year's end," Westpac chief economist Bill Evans said in releasing the data.
"That is a stronger outlook than Westpac's current forecast for growth."
RBA forecast
Also it was "certainly stronger" than the trend growth pace for 2010 which the Reserve Bank board forecast in the minutes of its April board meeting, released on Tuesday."
The bank holds its next meeting on May 4.
The minutes indicated the board decided to lift rates for a second month in a row in April because of the implication of a sharp increase in coal and iron ore prices in recent months.
"With the boost to incomes expected to ensure that growth in 2010 will reach trend there is little justification for the bank holding rates below normal," Mr Evans said.
He assessed 'normal' as being a cash rate of 4.5 per cent, 25 basis points higher than its current level.
That has led Mr Evans to predict a further rate rise in May, or June at the very latest.
