Australia's economic activity has been on a moderating mode as early as November last year as the latest annualised growth rate from Westpac-Melbourne Institute Leading Index released on Thursday flashed a slowdown but still in line with long-term trend.

The index also indicated that even before the flooding that hit large parts of the country, growth has been sluggish as economic activities retreated to 3.5 percent in November from the 4.4 percent seen in the previous month, en route to a long-term trend of 3.2 percent.

Westpac said that the annualised index effectively mirrors the pace of economic movements from November and well into the second half of 2011.

While a slow down has been recorded, economists said that the trend may indeed extend through the first half of the current year, considering the impact of the recent flooding disaster though Westpac noted that borrowers may get a reprieve due to the development.

A slow pace signalled by the economy, according to Westpac, could convince the Reserve Bank of Australia (RBA) to further delay rate hikes for the first six months of 2011, especially when effects of the flooding to the economy start kicking in.

Westpac also noted that the leading index reached a level of 278.4, coming from the October level of 278.3, with its chief economist, Bill Evans, projecting that the national economy would need to deal with flood-related impacts for the most part of the year.

Evans is seeing a roller-coaster ride for the economy in 2011, its activities expected to suffer slow downs during the first half then gears up for a turnaround in the last six months due largely to rehabilitation programs to be unleashed by the state and national governments.

Flooding effects also prompted for consumer confidence to decline by 5.7 percent in January, said Westpac, and with the mortgage rates increase seen earlier in November plus the moderating level of inflation as shown by consumer price index of only 0.4 percent, the RBA may have to freeze its policy rate in February.

Evans said that rate movements should be seen again in September at the earliest but that could change if rebuilding efforts could spur accelerated growth pace, thus necessitating for an earlier increase in cash rate, but still within the second half of the year.