The nation’s economic activity has hit 4.2 per cent in February, comfortably above the 2.8 per cent long term trend growth, according to the latest Westpac-Melbourne Institute Leading Index.

The latest figures brings the annualised growth rate to 3.1 per cent, broadly in line with the long term trend of 3.0 per cent.

Westpac’s Senior Economist, Matthew Hassan, said that the index shows a ‘clear shift  in momentum since 2012, and points to a growth rate moderately above 2013.

The index accelerated from 2.7 per cent over in September 2012 to 3.2 per cent in February, with commodity prices and a rally in equities driving much of the rebound.

“Aside from the contributions from shares (+0.7ppts) and commodity prices (+0.3ppts), the other components behind the 1.5ppt pick up in the Leading Index growth rate have been: US industrial production (+0.5ppts), corporate profits (+0.4ppts) and productivity (+0.2ppts). Other components have weighed more heavily on growth including dwelling approvals (–0.3ppts), money supply (–0.2ppts) and overtime worked (–0.1ppts),” Mr Hassan said.

Despite the strong growth prospects, Mr Hassan said that the short to medium term growth projections remain relatively low.

“Despite the lift in the Leading Index, Westpac expects growth in the Australian economy to remain sluggish and below trend in both 2013 and 2014,” Mr Hassan said.

Mr Hassan said that Westpac doesn’t expect the RBA to change the national cash rate when it next meets on May 7.