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Australia’s economy is set to log a more sustainable above trend growth through the remainder of 2021 and 2022, according to Westpac report, released Wednesday.

The six-month annualized growth rate in the Westpac-Melbourne Institute Leading Index, slowed to 1.47 percent in May from 2.86 percent in April.

Over the second half of 2021, Westpac expects that annualised pace to slow further to 4.5 percent, while the next year growth is forecast at a more normal but still healthy 3.2 percent.

The second half growth forecast is still well above trend but more in line with the six month annualized growth rate of 1.47 percent which the leading index has printed for May.

The index growth rate has moderated to 1.47 percent in May from just under 5 percent six months ago.

Two components account for most of the move, namely US industrial production and total hours worked. Both saw extremely strong ‘reopening rebounds’ as COVID restrictions were eased late last year.

Other components showed a more mixed performances over the six month period. On the plus side, commodity prices continued to surge. Most other components tended to follow the wider them of normalising growth.

Bill Evans, chief economist at Westpac said, given the improved pulse of the economic data in 2021, as signaled by the Leading Index, it seems unlikely that the central bank would expect to have to wait until 2025 before it achieves the objectives necessary to justify the first cash rate increase since November 2010.

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