The central bank has not yet done enough to curb inflation and further interest rates hikes are likely in the coming months, the South Australian Centre for Economic Studies says.
In its latest economic briefing, the centre said while demand in some sectors of the economy had begun to ease under the weight of earlier rate rises and soaring petrol prices, it now appeared demand was not slowing sufficiently.
The report forecasts demand across the Australian economy to remain strong in 2008-09 with economic growth likely to hit 4.3 per cent.
That compared to the Commonwealth treasury forecast of 3.75 per cent.
"The difference between our forecast and that of Commonwealth treasury is that we expect stronger outcomes in respect of both private business investment and in the growth of household incomes," said the centre's associate professor Owen Covick.
"A key factor here is the continuing resources boom, which is not only driving a strong rise in business investment spending, but is also supporting strong growth in incomes within Australia."
The centre expected growth in household disposable income to remain strong in the current financial year, supporting continued solid growth in household spending.
Employment growth was expected to remain firm, although slower than in 2007-08, while wages growth was also forecast to remain strong.
"On top of this there is the cut in personal income tax rates from July 1 and the positive impacts on family budgets of a number of other measures announced in the federal budget," Prof Covick said.
"The downside, however, of this more positive outlook for employment and incomes in the Australian economy is that it makes it highly likely that there will need to be at least one further increase in interest rates, so as to create the conditions necessary to bring inflation back within the Reserve Bank's target range on a reasonable time-scale."
