The Reserve Bank of Australia has lifted the official interest rate by 25 basis points to 4%, the first rise in the New Year after three consecutive rises during the last three months of 2009.
It comes after a majority of economists said they expected the board to raise rates due to a string of positive economic data released over the last few weeks.
RBA governor Glenn Stevens said in a statement this positive data supported the move, and said it is appropriate for rates to be closer to an average position.
“The global economy is growing, and world GDP is expected to rise at close to trend pace in 2010 and 2011. The expansion is still hesitant in the major countries, due to the continuing legacy of the financial crisis, resulting in ongoing excess capacity.”
“Global financial markets are functioning much better than they were a year ago and the extraordinary support from governments and central banks is gradually being wound back.”
Stevens also said economic conditions during 2009 were stronger than expected with a mild downturn, and that unemployment appears to have peaked. Investment, housing credit and dwelling prices have continued to grow, giving good indications the economy is improving solidly, he said.
“With the risk of serious economic contraction in Australia having passed, the Board moved late last year to lessen the degree of monetary stimulus that had been put in place when the outlook appeared to be much weaker.”
“Lenders generally raised rates a little more than the cash rate and most loan rates rose by close to a percentage point.”
Stevens also pointed out interest rates to most borrowers remain lower than average, and that with growth likely to be close to trend over the coming year, “it is appropriate for interest rates to be closer to average”.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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