POPULAR WORDS

Despite poor data released today on future economic activity, the recent encouraging news on housing activity and a more resilient labour market leads Westpac to believe the Reserve Bank will not cut rates next month. The Westpac-Melbourne Institute Leading Index of Economic Activity forecasts a continuing weak economy into the second half of the year. However, the data shows the low point has been reached and it is simply a slow recovery that will result in continued weakness in the quarters ahead, Westpac general manager of economics Bill Evans says. "There was some room for optimism in the movements in components of the Index in March," Evans says. "Those components associated with the construction industry – building approvals and new telephone connections – all rose in March." Evans says the expected continuation of the 5% overnight cash rate will have a positive impact on the dollar. "With Australian short-term interest rates likely to be sustained at least 1% above US levels, for the first time since 1996, we expect to see a continuation of the recent solid recovery in the Australian dollar," he says.