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SYDNEY: Australia's central bank raised interest rates by a widely-tipped 25 basis points for a second successive month Tuesday to 3.5 per cent, citing strong growth in China and better prospects across Asia.
Central bank governor Glenn Stevens said Australia's major trading partners in the region were experiencing "noticeably better" conditions.
"Growth in China has been very strong, which is having a significant impact on other economies in the region and on commodity markets," Stevens said.
"For Australia's trading partner group, growth in 2010 is likely to be close to trend."
Australia last month became the first advanced economy to raise interest rates since the global financial crisis last month, declaring the risk of a recession was over.
Economic conditions had been stronger than expected and measures of confidence had improved thanks to government stimulus measures, and private investment appeared not be as weak as forecast, Stevens said Tuesday.
Housing and public infrastructure spending were accelerating, and Stevens said there were early signs of an improvement in labour market conditions.
"The rate of unemployment is now likely to peak at a considerably lower level than earlier expected," he added.
"With the risk of serious economic contraction in Australia now having passed, the Board's view is that it is prudent to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker," Stevens said.
Analysts said Stevens' tempered remarks pointed to a likely pause in further increases to the cash rate until 2010.
"The specific language... could possibly suggest the RBA believes it has done enough for the time being, possibly pausing over December and January before reassessing the appropriateness of the cash rate in February," said IG Markets analyst Cameron Peacock.
It was the only major Western nation to avoid a recession in the worldwide slump and posted growth of 0.6 per cent in the three months to June - the best in the developed world.
The release of the lowest inflation figures in 10 years last week added to market expectations of a modest rise for November.
- AFP/yb
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