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02 March 2010

Interest rates rise to 4%

The following interest rate announcement from the RBA, resulted in three of the major banks lifting interest rates in step with the rate rise (including ANZ, CBA and St George). Two thirds of economists predicted the rate rise and there are more to come through 2010.

Australia raises interest rates to 4%

Australia's central bank has raised interest rates, for the fourth time since October, as it seeks to cool its growing economy.

The increase, to 4% from 3.75%, was widely expected by economists.

Australia was the only major economy to avoid recession, and the first to raise rates from 50-year lows as the economic crisis eased. It avoided the worst of the slump due to government spending and massive Chinese demand for its commodities.

The government had introduced a number of multi-billion dollar stimulus packages, including increased infrastructure spending and cash handouts to most Australians since the end of 2008 to lift consumer spending.

Following the latest rate rise, the Reserve Bank of Australia said: "With growth likely to be close to trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average."

Australian Treasurer Wayne Swan said further rate increases must be expected.

"Rates can't stay at emergency levels forever," Mr Swan said. "Rate rises are an inevitable consequence of a recovering economy that is outperforming the rest of the world."

Australia's economy only contracted in the final three months of 2008.

It therefore avoided recession, which is generally defined as two consecutive quarters of negative growth.

Source: BBC News 02/03/2010

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