Rates may rise again

More good news for entrepreneurs: the boom keeps booming. But chances of a rate hike in November is also firming.

The Westpac Leading index, which indicates the likely pace of economic activity three to nine months into the future, reports today an annual growth at 5.6% in August, which is above its long term trend of 4.3%.

Chief economist Bill Evans says that growth in the index was expected to head downwards after a long robust period. However this month’s reading points to a clear recovery. The recent low point in growth was well above the long term trend.

“And the subsequent reacceleration points to a sustained period of strong growth in the Australian economy,” he says.

He says key drivers of the growth are consumer spending supported by strong employment growth and business investment.

While the recent turmoil in global credit markets probably averted an interest rate rise, the Reserve Bank could well put up rates in November by 0.25% if inflation rises, he says. The Reserve Bank meets on 6 November.

Meanwhile the dollar fell marginally this morning to US88.74c after opening today at US88.81c, a big fall on last night’s close at US90.06c.