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SYDNEY - Economic activity is likely to accelerate in the coming months and will likely sustain strong growth for some time to come, new figures show.
Westpac-Melbourne Institute's Leading Index of Economic Activity, which indicates the likely pace of economic activity three to nine months into the future, rose 1.7 points to 251.7 index points, bringing the annualised pace of growth to 6.7 per cent in April, well above its long-term trend of 4.4 per cent.
Westpac chief economist Bill Evans said not only had the economy shown signs of accelerating but it had been travelling faster than previously thought.
Strong national accounts data resulted in a significant upwards revision to the previous growth rate of 4.4 per cent in March to 6.4 per cent.
"The revisions only accentuate the consistent message which the Leading Index has been sending for the last year or so," Evans said.
"That is that the Australian economy is very likely to have entered a period of strong sustained economic growth.
He said Westpac expected economic growth of 4.2 per cent in 2007 and 4.5 per cent in 2008.
"That will be supported by strong consumer spending; a recovery in dwelling investment; solid growth in business investment and a welcome acceleration in export growth."
Evans said the combination of strong demand growth, a rising trend in inflation and wages growth throughout 2007 would likely cause the Reserve Bank of Australia to raise interest rates by at least 0.5 percentage points in the first half of 2008.
- AAP
