Last quarter, we indicated that there were some downside risks to the domestic economy. These risks have somewhat dissipated over the last three months due to the recent recovery in household spending, the resurgence in housing construction and prospects for an improvement in international economic conditions. The combination should now ensure that domestic interest rates remain on hold for the foreseeable future.

While unemployment levels in Australia continue to edge higher - the unemployment rate rose to 6.9% in May from 6.0% only eight months earlier - and could experience further weakness, the prospects for employment growth in the coming year have vastly improved in the last three months.