Australia's central bank lifted its main interest rate to 4.5% today, citing inflation concerns, rising house prices and booming commodities trade linked to Chinese demand.
Reserve Bank of Australia governor Glenn Stevens said the risk of serious economic contraction had passed some time ago, and the bank was now adjusting the interest rate towards more average levels.
'The Board expects that, as a result of today's decision, rates for most borrowers will be around average levels,' he said of the widely-expected 25 basis point hike - the third in as many months and sixth since October.
Despite recent debt fears out of Greece, Stevens said world markets were faring well and global growth forecasts had been recently revised upwards.
But Australian commodity prices were rising faster than expected and looked likely to return to peak levels last seen at the height of the mining boom in 2008, boosting incomes and investment in the resources sector, he said.
'Under these conditions, output growth over the year ahead is likely to exceed that seen last year, even though the effects of earlier expansionary policy measures will be diminishing,' Stevens said.
There was also considerable buoyancy in the housing market, he added, with prices continuing to climb over recent months.
According to the Australian Bureau of Statistics, house prices across the country grew by an average 20% in the past 12 months.
While underlying inflation had declined, due to slowing private-sector labour costs during the global downturn, Stevens said it was likely to trend in the upper half of the bank's target range of between 2% and 3%.
