Good news: the Australian economy looks like it’ll be taking a turn for the better next year.

The not-so-good news, for borrowers at least, is that the upturn should pave the way for rising interest rates.

The latest Westpac/Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, suggests economic growth will remain below trend into the first half of 2015.

But while the index remains in negative territory, it did pick up in October, suggesting the economy could be headed for greener pastures during the June quarter, Westpac chief economist Bill Evans said.

Mr Evans said the improved growth outlook suggested by the index was consistent with Westpac’s view of where the economy was headed, driven by expectations of a pickup in consumer spending and non-mining investment in 2015.

That would lend support to the labour market, pushing the unemployment rate down through the second-half of 2015 to 5.9 per cent by the end of the year, he said.

The pickup would then allow the Reserve Bank to begin hiking interest rates as early as August 2015, he said.

“Overall, we expect Australia’s growth rate in 2015 to reach an above trend 3.2 per cent despite a larger drag from mining investment,” Mr Evans said.

“Westpac expects that, with improving growth momentum in consumer spending; non-mining business investment; and the labour market, the next move in rates will be a tightening, but not until the second half of 2015, with August currently appearing to be the date for the first move.”