Australia is set for strong economic growth over the next nine months, increasing the likelihood of another interest rate rise, according to an indicator released on Wednesday.

The Westpac-Melbourne Institute leading index, which predicts the likely pace of economic activity in the upcoming three to nine months, hit a seven year high in November at an annualized rate of 6.0 percent.

Westpac chief economist Bill Evans said this was the fastest annualised growth rate of the index since February 2000, with the index now above trend for most of 2006.

"It continues to point to a solid pick up in economic growth in the first half of 2007," he said.

Growth is expected to accelerate to 3.2 percent during the year to November 2007, up from 2.2 percent in the same period last year.

Evans said he expects the Reserve Bank of Australia to lift interest rates by 25 basis points once more, after hiking them by that amount three times last year to the current six-year high of 6.25 percent.

"The leading index provides some support to the higher inflation view pointing to rising activity which would put further pressure on capacity, which is already stretched," he said.

"The key aspects of our growth forecasts are a consumer maintaining solid but below average spending pace, residential building entering another modest down cycle in response to higher interest rates, business investment remaining at very high levels but showing little new growth and strong export growth," he said.