Australia's economy is likely to grow quickly in the coming months, according to a leading index of activity, which reflected an acceleration in growth in the recent quarter.

The Westpac Bank-Melbourne Institute leading index of economic activity in May climbed to 264.7, an increase of 0.4 points.
While annualised growth in the index edged down from 7.5 per cent to 6.7 per cent, the new figure was still more than double the long-run trend.

Annualised growth in the coincident index jumped from 3.3 per cent in April to 3.7 per cent in May, well above its average of 3.1 per cent.

"That is consistent with the current momentum of the economy being above trend," Westpac chief economist Bill Evans said.

"We are forecasting that the momentum of the economy in the second quarter is around a 3.5 per cent pace."

The growth indicators would back the central bank's confidence on the domestic economy and supports a further rise in interest rates as soon as August, Mr Evans said.

The Reserve Bank of Australia said Tuesday, it will wait for key inflation data due on July 28 before it gives a ruling on its benchmark interest rate next month.

Westpac forecasts underlying inflation will be high at the top of the central bank's 2 to 3 per cent limit and, if so, will urge the Reserve Bank to hike at its August 3 policy meeting.

"Sharply adverse developments in the global economy or a more benign read on inflation will allow the Board to defer a rate hike until later in the year," Mr Evans said.