The Reserve Bank believes the economic recovery is well under way with employment recovering strongly and the jobless rate unlikely to reach eight per cent as previously feared.

Even so, in the minutes of its December 1 monthly board meeting, the central bank is sticking with its view that the cash rate in unlikely to rise in the next three years in what it sees as an “uneven and protracted” economic rebound.

The Westpac-Melbourne Institute leading index for December is due on Wednesday to give a clue as to how strong the recovery might be.

In November, the index – which indicates the likely pace of economic activity three to nine months into the future – pointed to growth of above the long-term trend rate of around 2.75 per cent for the first time since November 2018.

The data comes alongside other figures this week which showed consumer confidence at its highest level for the year and an improving manufacturing sector that is set to strengthen further in 2021.

The Australian Bureau of Statistics latest weekly payrolls report, a prelude to Thursday’s official labour force figures, also saw a further strengthening in employment.

The bureau said more than three-quarters of payroll jobs lost to mid-April had been regained by the end of November.

These positive results come as Treasurer Josh Frydenberg puts the final touches to his his mid-year budget review that is expected to be released on Thursday.

Economists predict the budget deficit for 2020/21 will show a modest improvement to around $200 billion, compared with the record $214 billion shortfall announced in the delayed October budget.

Treasury’s economic forecasts will also be updated.