The Reserve Bank of Australia (RBA) has raised the cash rate by 25 basis points to 4.25 per cent, saying growth and inflation are around trend and it is appropriate for interest rates to be closer to average.
"With the risk of serious economic contraction in Australia having passed some time ago, the board has been lessening the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker," the central bank said in a statement on Tuesday.
"Lenders have generally raised rates a little more than the cash rate.
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
"Interest rates to most borrowers nonetheless have been somewhat lower than average.
"The board judges that with growth likely to be around trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average.
"Today's decision is a further step in that process."
The move came after the RBA board meeting earlier on Tuesday in Sydney, and was in line with most expectations.
Nine of 15 economists surveyed by AAP had expected the central bank to increase the cash rate by 25 basis points on Tuesday.
It is the fifth time from the past six board meetings that that RBA has lifted the cash rate.
The cash rate has not been that high since February 2009.
