Rates, inflation to take edge off growth

The latest wage figures are likely to turn up the heat on the government's economic performance. (AAP)

Ballooning inflation and an expected rapid rise in interest rates is likely to take the edge off economic activity this year, particularly as Australians' wages fail to keep up with cost of living pressures.

The Westpac-Melbourne Institute leading index, which indicates the likely pace of economic activity three to nine months into the future, fell to 88 per cent in April from 1.69 per cent.