UPDATE 11.50am: Westpac’s chief economist Bill Evans has warned economic growth is likely to slide to about 2.5 per cent in 2014 unless the Reserve Bank delivers more interest rate cuts.
Discussing the latest Westpac-Melbourne Institute Leading Index, which showed the economy picking up speed in 2013, Mr Evans said the outlook for 2014 was less rosy.
Mr Evans said the economy would continue to benefit from the mining investment boom in 2013, with spending in the sector expected to peak in 2014.
“The issue around growth will emerge through 2014 when mining investment is expected to be a drag on growth,” he said.
"Without further rate cuts growth is likely to struggle to exceed 2.5 per cent in 2014."
The Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, rose to 4.1 per cent in September, from 2.9 per cent the previous month.
However, Westpac's Coincident Index, which measures current economic activity, was 2.6 per cent, below its long-term average of 3 per cent.
Westpac chief economist Bill Evans said the Leading Index had now been above its long-term trend for two months.
However, the bank's own view of the economic outlook was a little less optimistic, with a forecast of 3.5 per cent growth for 2013.
Minutes from the Reserve Bank’s November meeting strongly hinted that the bank was likely to cut rates when it meets again on Tuesday, December 4.The Reserve Bank last cut the cash rate in October, to its current level of 3.25 per cent.