The Reserve Bank has lifted its official interest rate by 25 basis points to 3.25 per cent.
This is the first rate rise since March 2008. This 25 basis point rise to the official rate adds approximately $45 a month to a $300,000 25 year home loan.
Australia is the first nation to lift rates since the financial crisis began and the second country in the world, after Israel, to begin tightening its monetary policy.
Yesterdays move is likely to be the first of many increases that the Reserve Bank will make to its official cash rate as the economy continues to recover.
Grattan Institute economist Saul Eslake stated yesterday that the global financial crisis was almost if not completely over and that most parts of the economy no longer needed the support of very low interest rates.
Roy Robertson interest rate Strategist for Macquarie predicted yesterday's rise and stated that good news on the economy will be bad news for interest rates.
Mr. Swan stated that the rise would make life tougher on families. Mr. Swan also added that he did not want to see banks raise variable mortgage rate by more than 25 basis points.
Mortgage brokers feel that the rate hike will put a healthy market in jeopardy.
Governor Glenn Stevens said in a statement that the global economy was resuming a growth path and that its recovery was likely to continue during 2010.
The Reserve Bank cut the rate by 425 basis points between September 2008 and April 2009 in the heat of the global economic downturn. Mr. Stevens warned that the basis for cutting the cash rate so quickly had now passed.