Australia economy set for years of growth - c.bank
* RBA resoundingly upbeat on economic outlook
* Construction spending up strongly to record in Q3
* Odds narrow for third successive rate rise next week
By Wayne Cole
SYDNEY, Nov 25 - Australians can look forward to years of brisk economic growth built on booming resource investment, rapid population growth and rising household incomes, a top Australian central banker said on Wednesday.
In a resoundingly upbeat speech that only fuelled speculation about an imminent increase in interest rates, Reserve Bank of Australia Deputy Governor Ric Battellino also highlighted the strength of Australia's major Asian trading partners.
"He's essentially hinting at a new golden era of growth ahead for Australia," said Su-Lin Ong, a senior economist at RBC Capital Markets. "It suggests that there is no strong argument for a pause at next Tuesday's RBA board meeting."
Investors seemed to agree, according to one measure of pricing from Credit Suisse <CSRBA=CSAU> which showed a 77 percent chance of a rise to 3.75 percent at the RBA's meeting on Dec. 1.
December interbank futures <0#YIB:> slipped to imply a rate of 3.69 percent, compared to the current 3.5 percent, and heralded further rises to 4.5 percent by June. That outlook helped lift the Australian dollar half a U.S. cent to $0.9250.
The RBA had already hiked rates in October and November, the first in the G20 to do so since the global credit crisis began.
The domestic economy has consistently surprised with its resilience this year and Battellino saw even better times ahead.
"With the economy having only recently entered a new upswing, it is reasonable to assume that we will see this growth extended for a few more years yet," said Battellino, in a speech to a housing industry conference.
BUSY BUILDING
His optimism was supported by data on construction work for the third quarter which showed a surprisingly strong increase of 2.2 percent to a record A$39.63 billion .
That came on top of a sharp upward revision to spending in the second quarter which was now estimated to have jumped 4.5 percent, compared to an initial fall of 0.1 percent.
The strength was broadly based with residential building boosted by low mortgage rates and non-residential building by government stimulus spending on schools. Public spending on roads, rail and the like also lifted engineering work to a new high.
Since construction accounts for around 16 percent of the economy, analysts estimated the spending added almost 0.4 percentage points to growth in the third quarter.
"Today's data is much stronger than expected and adds clear upside risks to our Q3 GDP forecast, while also raising the risk that Q2 GDP could be revised higher," said Scott Haslem, chief economist at UBS.
"As such, it reinforces our view that the RBA remains on track to lift the cash rate to 4.25 percent by Q1, and we continue to look for a hike next week," he added. The construction binge is being driven in part by Asian demand for Australia's resources such as coal, iron ore and, increasingly, liquified natural gas.
Battellino stressed that this boom in the resources sector could another five years or more, boosting investment spending.
That would feed demand for labour, keep immigration strong and thus support rapid population growth, he said. Household incomes were likely to rise solidly, which would help underpin the demand for housing.
Battellino played down concerns that Australian house prices were too high compared to incomes, suggesting that high levels of household indebtedness would not dissuade the central bank from further raising interest rates.
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