Australia's economic growth rate slowed in July, marking the fourth consecutive monthly fall in the pace of expansion.

The Westpac-Melbourne Institute leading index of economic activity released today showed an annualised reading of 6.8 per cent in July, lower than an upwardly-revised June reading of 7.4 per cent.

However, the reading, which is well above the long-term growth average of 3.2 per cent, still points to rapid growth in the future.

"The growth rate of the index is still consistent with a faster pace of growth in the economy than Westpac expects," according to Westpac chief economist Bill Evans.

"Our current forecast is that year average growth in 2010 will be 3.5 per cent, with an even pace through the year, despite some sizeable swings in different sectors."

Westpac predicts gross domestic product and domestic final demand to both post an annualised growth rate of about 4 per cent in the third quarter.

Such rapid expansion is one reason the central bank has signalled interest rates will likely have to rise in coming months to control future inflation.

Mr Evans said he now believes the Reserve Bank of Australia will lift rates when it meets again in October, citing signals given by RBA in the September minutes that were released yesterday.

The RBA raised rates six times between October 2009 and May 2010, but has since held it steady at 4.5 per cent.