Australia’s GDP growth prospects look reasonably good in the near term and there is still no sign of inflation starting to accelerate. To give the RBA its due, these are the conditions it forecast back in its November quarterly Monetary Policy Statement and continues to forecast in its most recent quarterly Monetary Policy Statement released last week. This lack of change in the RBA’s key economic forecasts is one reason why we and just about all other market analysts expect no change to the RBA’s 1.50% cash rate for the next few months. Another reason for expecting no cash rate change is that RBA Governor Lowe as good as said last week that major central banks no longer see need to reduce interest rates further.

At this stage, it would take a major turn of events causing a deterioration in global and Australian growth prospects relative to current expectations of improving growth to bring central banks, including the RBA, back in to the fray on the side of lowering official interest rates.

Our view, and that of many other analysts, has been that there is a temporary feel about the current lift in global and local economic growth, but we have felt that way for some months and global growth so far is showing signs of becoming more robust rather than weaker. Downside risks to global economic growth still cloud the medium-term horizon – the risk of a growth-restraining international trade war developing in response to the Trump-Administration’s attempts essentially to onshore US economic activity; a potential hard economic landing in China as it tries to temper excesses in its residential property market and at the same time reform bank lending practices; and in Australia a possible downturn in housing hurting highly leveraged households.

There are other significant risks too, including a possible combination of higher US interest rates and a stronger US dollar triggering corporate financial collapses in several key Asian economies where many companies have borrowed heavily in US dollars. Europe, notwithstanding improving economic conditions over recent months, still faces an extended of period of concern about the stability of the EU and the euro currency amid potentially problematic national elections and the difficult negotiations with Britain over its exit from the EU.

The list of potential spoilers of the current phase of improving global economic growth is still a long one, but it is also fair to say that nothing has taken any meaningful turn for the worse recently. Instead growth momentum is building. In the US, domestic demand is starting to fire on all cylinders, including firm housing activity, rising general household spending and over recent quarters business investment spending too. For the time being, most US households and businesses are also finding more to be optimistic about as President Trump’s economic plans are unveiled.

In China, what little economic data has been released over the Lunar New Year holiday period and just beyond implies relatively strong economic growth continuing at least through Q1 2017. January exports and imports, measured in US dollar terms, both showed very strong growth, respectively 7.9% y-o-y and 16.7% y-o-y. The big lift in imports, including increasing demand for mineral commodities, is also helping to sustain the sharp increase in the likes of the iron ore price adding to the big lift that has already started in Australia’s terms of trade in turn boosting sharply Australian national income.

In Australia, economic growth appears to have rebounded sharply in Q4 2016 after the fall registered in Q3. Much stronger exports in value and to an extent in volume too are providing one boost to growth, but still reasonably robust home building activity and modest improvement in household consumption spending are helping to lift growth too. Australian economic growth looks set to drift stronger (much as the RBA is predicting) barring a sharp pull-back in housing – a distinct possibility but still holding out on the medium-term horizon.

Given the list of potential spoilers to firmer economic growth it is fair to say that stronger economic growth is occurring against the odds. Nevertheless, momentum is on the side of firmer growth continuing and the RBA is responding reasonably by indicating that growth requires no further assistance from a lower cash rate. Our view is that the RBA could hold the cash rate steady at 1.50% throughout this year and looking beyond in to early 2018 growth momentum points to the start of a cycle of modest cash rate hikes. Of course, if the potential growth spoilers start to materialise, the RBA may return to cutting the cash rate in 2018. At this stage, we lean more towards cash rate hikes starting in 2018, but it is a finely balanced call based on the power of momentum relative to downside growth risks that may fade.