Canada's Housing Bubble

Apr 06, 2010 news.bbc.co.uk

Australia's central bank has raised interest rates to 4.25% from 4% as it attempts to cool inflation and slow rises in house prices.

The move is the fifth rate rise since October, and the bank has indicated there are further increases to come.

The bank's governor, Glen Stevens, said that the recovery of the Australian economy meant interest rates could return to "average" levels.

He also warned against a bubble in the housing market and rising inflation.

"Interest rates to most borrowers... have been somewhat lower than average," the governor said in a statement.

"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."

Australia's official rate of inflation was at 2.1% for the last three months of 2009 - within the central bank's target of between 2% and 3%.

However, more recent data indicates that the rate of inflation is increasing.

The rise in interest rates comes despite recent falls in consumer spending, and a slowdown in the construction sector.

Australia has been faster than other countries in raising interest rates following the global economic downturn.

The country avoided falling into recession, recording just one quarter of negative growth at the end of 2008.