Strong GDP growth published on Wednesday brings rate hikes back onto the Reserve Bank of Australia's agenda although the central bank can still wait, according to Bankwest, a wholly owned subsidiary of the Commonwealth Bank (ASX:CBA).

Bankwest Chief Economist Alan Langford said in a statement released today, "the Australian economy's resilience in the face of the sting in the tail of the GFC was confirmed by the June quarter National Accounts."

Latest ABS figures show that GDP, in seasonally adjusted volume terms, grew 1.2 per cent in the June quarter 2010. Growth through the year to June quarter 2010 was 3.3 per cent.

In seasonally adjusted terms growth in the expenditure measure of GDP was driven by a 1.6 per cent increase in household expenditure and an increase in exports of 5.6 per cent.

Offsetting these increases was the change in inventories, which detracted 0.7 percentage points from GDP growth for the quarter.

The industries that provided the main contribution to growth in seasonally adjusted terms in the production measure of GDP in the June quarter were Construction with a 4.9 per cent increase, Mining with a 1.5 per cent increase and Professional, scientific & technical services with a 2.3 per cent increase.

In seasonally adjusted terms Real gross domestic income increased by 4.0 per cent, which is the largest quarterly growth in gross domestic income since March 1973. This increase in gross domestic income reflects an increase of 12.5 per cent in the Terms of trade.

Mr Langford said, "The strong growth data puts further interest rate increases squarely back on the agenda, if they had ever been removed from it anyway. But the National Accounts' inflation measures were broadly in line with the consumer price index that puts relevant measures of inflation within the central bank's 2 to 3 per cent medium-term target range, and if anything decelerating."

"So unless inflation jumps back up again, there is no immediate need for the RBA to consider anything more than a bit of tweaking."

"In the face of burgeoning concerns that the recovery in the US economy is faltering, the RBA can still afford to wait until the next CPI, due for publication in late October, before it gives serious consideration to resuming the tightening phase that was put on hold three months ago. But if partial economic data continues to be upbeat, and/or the deceleration in the underlying measure of consumer price inflation stalls, at least one pre-Christmas cash rate increase cannot be ruled out. Moreover, it would not take much for it to become the RBA's base-case expectation."

Sources: Bankwest, Australian Bureau of Statistics