This could very well be a week where economic policy for the next one to two years, including the run up to the 2010 federal election, is set with the Reserve Bank widely expected to provide more explicit views on the direction of monetary policy and the June quarter national accounts will confirm that the economy is in far better shape than anyone would have thought, even just three months ago.

The RBA board meets tomorrow and issued its usual post meeting statement at 2.30pm: it won’t include a rate rise, but is will probably contain a change of wording in the final two to three paragraphs about policy direction.

It is also being watched offshore because it’s the first central bank to meet with the latest signs of the rebound in Australia and around the world in its thinking. the Israeli central bank lifted its key rate 0.25% last week to become the first to do it since the rush to ease earlier in the year around the globe.

Besides Australia, central banks in Europe and Brazil also meet to examine the current state of their monetary policies, but none are considered to be in the same position of Australia (or Israel for that matter).

Last week saw the list of economies reporting growth in the June quarter grow to 12 countries: Singapore, China, Hong Kong, Malaysia, the Philippines, Korea, Taiwan, Indonesia, Thailand, Japan, Germany and France.

Australia will likely join this list when it reports June quarter GDP growth in the week ahead.

For this reason Australia is on the cusp of a sustained tightening in monetary policy that could take two years: in contrast the Fed in the US is still in the midst of running a very accommodative policy for the next year, or more, because the recovery there is weak and looks like being weak well into next year.

Business investment in the US in the second quarter fell, as it did in the UK, Europe and Japan. In Australia it rose 3.3%, and was up 16.7% for the year to June: it was down sharply in the 12 months to June in those other countries. And that’s one of the major differences between Australia and the other major Western economies.

Last week’s construction spending figures and then Thursday’s business investment numbers for the June quarter were much stronger than anyone thought. That has seen a wholesale revision of growth estimates and the timing of the first rate rise.

The AMP’s Dr Shane Oliver said on Friday that the “upturn in business investment plans is consistent with the huge upswing in business confidence and the improving profit outlook.

“The continuing run of better-than-expected economic data both globally and in Australia signals that the chance of an interest rate hike by year end is steadily rising.”

Macquarie Bank interest rate strategist Rory Robertson said that “with good news on the economy clearly being bad news for interest rates, the coming confirmation that GDP is growing rather than shrinking could indeed be the hook the RBA uses on October 6 to start normalisation of its cash rate.

“A particularly weak local jobs report on September 10, on top of the dismal US payrolls report in the pipeline for September 4, now may be required to nip that October hike in the bud.

“The next phase of speculation will involve analysts highlighting the prospect of 50bp rather than 25bp hikes, given we’re starting from an extraordinarily low 3%,” he wrote.

And the National Australia Bank bought forward its rate rise forecast and now sees one happening in November.

“Markets have now more than fully priced a 25bps hike by November and, against the continuing flow of positive data both at home and abroad, especially in Asia, it now seems likely that the RBA will ratify the market’s expectations of rate hikes before Christmas,” the NAB’s chief economist Alan Oster said Friday.

“September and October still seem too early but by November we expect the time will be right for the first hike.

So, tomorrow’s post-RBA board meeting statement will be viewed, pulled apart and parsed to see if any light can be shed on when rates will rise.

The private credit figures from the RBA today will show that housing is the only growth area for lending at the moment.

That will be one of the oddities of the present warm inner glow about the economy: while business investment in the June quarter was much stronger than expected, up 3.3% from March, business lending was sluggish, with the trend slowing more sharply as the quarter went on.

The growth figures for the June quarter will be the major release: they will confirm that growth rose from the March quarter to as much as 1%, according to the AMP’s chief economist, Dr Shane Oliver. A survey by AAP of leading business economists put the growth estimate at about 0.7%, which would follow the 0.4% rise in the March quarter and the 0.6% fall in the three months to December. The September quarter last year saw growth of just 0.1%.

Dr Oliver said the economy could see higher growth because of strength in consumer spending, business investment and exports.

Rory Robertson said the growth numbers look like they will be “significantly” higher than the 0.4% in the March quarter.

Before then though we will get figures on June quarter company profits, business inventories, the balance of payments and government finance, all of which will feed into the growth figures.