Sydney, Jul 18 (IANS): Australia's economic conditions are at their strongest since September 2011, but the growth rate of future economic activity remains below long-term trend, according to a survey released Wednesday by the Westpac Banking Corporation and the Melbourne Institute.

The Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was at 1.6 percent in May, well below its long-term average of 2.6 percent, reported Xinhua.

However, Westpac chief economist Bill Evans said the growth rate was the fastest in 10 months and it would keep improving in the second half of 2012 and into 2013.

"That profile presumes further interest rate relief through the second half of 2012 although the current disposition of the monetary authorities appears to be to sit tight for the next few months," Evans said.

"Apart from mining, other sources of spending - residential housing and business investment - were soft and reliably in line with the signals from the Leading Index in 2011."

The annualized growth rate of the Coincident Index, which gives a pulse of current economic activity, was 4.2 percent in May, well above its long-term trend of 3.1 percent.

Evans said the Reserve Bank of Australia (RBA) was in a "wait and see" mode.

"Despite our own scepticism, the (RBA) board was clearly impressed by the 1.3 percent surge in GDP (gross domestic product) growth in the March quarter," he said.

"As indicated by the rise in employment, which is key to the increase in the coincident index, the board describes the labour market conditions as relatively favourable."

The RBA left the cash rate unchanged at 3.5 percent at its July board meeting.