As various hotspots in the Australian economy show signs of cooling, analysts are pushing their forecasts for higher rates further back into 2005.

On several occasions in 2004 the Reserve Bank of Australia (RBA) reiterated it still had a bias to lift rates but left the official cash rate on hold at 5.25 per cent, with no movement since the two 25 basis point hikes of November and December 2003. In its most recent quarterly monetary policy statement published in November, the RBA said that while there was no urgency to raise rates at this stage, it was likely the economy would require higher rates at some stage of the current expansion.

Analysts believe that while a recent string of soft economic data is keeping the RBA on the sidelines for now, the case for higher rates remains intact as inflation shows signs of trending up.

"The run of recent numbers has been on the weak side," Commonwealth Bank chief economist Michael Blythe said.

Retail sales figures have come in on the weak side of expectations for five consecutive months while on the housing front, building approvals have recorded seven consecutive monthly falls.

The latest figures on Australia's rate of economic growth have also come in softer than expected.

Mr Blythe predicted the RBA would lift rates in either February or March - the central bank does not hold a board meeting in January - but said the odds of it happening later had gone up.

"The risks to our forecasts for the March quarter are to push it back again, particularly if the data remains on the soft side," he said.

"The emerging argument is that maybe the stronger Australian dollar again reduces that need to move in too much of a hurry."

However the key fundamentals in the economy still looked very supportive of higher rates, Mr Blythe said.

"Real wages are rising, employment is rising, unemployment is very low, consumer confidence is high," he said.