Australia lifts rates for fifth time since October

SYDNEY: Australia announced its fifth rate hike since October on Tuesday and said borrowing costs would continue to rise as growth and inflation return to normal after the global crisis.

The Reserve Bank of Australia (RBA) lifted the official cash rate 25 basis points to 4.25 percent, underlining confidence that the country has seen off the downturn unscathed and must now work to moderate prices.

"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," RBA governor Glenn Stevens said in a statement.

Australia was the first developed economy to lift rates after the world's biggest financial shock since the Great Depression, raising them 25 basis points to 3.25 percent in October and a further four times since.

The Reserve Bank is now unwinding its emergency cuts of late 2008 and 2009, when interest rates were slashed by 425 basis points to a five-decade low of 3.00 percent as the world economy tanked.

"Australia's terms of trade are rising, adding to incomes and fostering a build-up in investment in the resources sector," Stevens said. "The rate of unemployment appears to have peaked at a much lower level than earlier expected," he added.

"The process of business sector de-leveraging is moderating, with ... indications that lenders are starting to become more willing to lend to some borrowers."