 Australia's solid economic momentum suggests faster rate hikes. Australia's economy expanded faster than forecast last quarter as households stepped up spending, bolstering the case for an outsized 40-basis point interest rate hike next week. Gross domestic product advanced 0.8% from the final three months of last year, taking the annual pace to 3.3%, government data showed Wednesday. That was higher than estimates and outpaced the pre-pandemic average of around 2%. In response to the stronger result, the three-year government bond yield jumped to 2.925%. Overnight index swaps or pricing in a 40-basis point rate rise by the Reserve Bank of Australia at Tuesday's meeting. RBA Governor Philip Lowe is likely to view the data as validation of his hawkish pivot after raising the cash rate for the first time in 11.5 years last month to 0.35%. Some economists, including those at ANZ Banking Group Limited and AMP Capital Markets, are predicting a 40-basis point move next week. The report shows a fundamental story about improving consumer spending, some signs of business investment and government being a solid driver of growth, said AMPs Diana Malsina, who expects the RBA's cash rate to hit 1.5% to 2% by year-end. They will want to get ahead of the inflation outbreak. Money market pricing shows the benchmark at 2.7% by December. What Bloomberg Economics Says A record rise in inventories flattered one-cue growth, and could be a drag going forward. It may take until 2-H for a clear read on the underlying health of the economy. James McIntyre, Economist For the full report, click here. The household-saving-to-income ratio fell to 11.4%, the lowest level since the onset of the pandemic, from 13.4% as the increase in households spending outpaced growth in household income, the ABS said. There are questions about the durability of consumer spending in coming quarters with wages growth rising at half the pace of CPI in the first three months of the year, even as the labor market is the tightest in five decades. Low expects a jobless rate below 4% will spark a faster pickup in wages. In a positive sign for a pickup in labor costs, Wednesday's data showed companies wage bills climbed 5.5% in the first quarter from a year earlier. Other details from the GDP report. household spending jumped by 1.5%, contributing 0.8 percentage point to GDP growth. Government spending climbed 2.7%, adding 0.6 point. Imports were the biggest drag on GDP growth climbing 8.1% from the prior quarter, the biggest increase since December 2009, and detracting 1.5 percentage points from GDP. Dwelling investment fell 1%, cutting 0.1 point. Dwelling affected supply chains and weakened activity in construction and mining. Hidden economic risks lurk for new Australian leader Albanese. New treasurer Jim Chalmers acknowledged some of the strengths of the $2.2 trillion, $1.6 trillion, economy, while pointing to accelerating inflation that squeezing households and a darkening global outlook. The international environment is difficult as well in becoming more so, he told reporters after the release, citing risks of a U.S. recession. The other big concern in the international environment is the Chinese management of COVID. Their approach to COVID does pose a risk as well to our domestic economy.