Whoever wins the election will inherit an economy growing at well above its sustainable rate, making further interest rate rises inevitable according to the latest Westpac Melbourne Institute leading economic index.
The index purports to predict economic growth three to nine months into the future. It came in at 6.7 per cent in May, down from April's 7.5 per cent but still way in excess of Reserve Bank's view of a sustainable rate, believed to be about 3.25 per cent.
Driving the growth are improving international conditions and near-record minerals prices, but so extreme is the prediction that Westpac's chief economist says he doesn't fully believe it.
"But I have to say, over the years - particularly in the Asian crisis when I dismissed what the index was telling me - it turned out to be right," Bill Evans told the Age.
"I was saying then Australia wouldn't cope, the index said Australia would cope, and we sailed through it"...
