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Australia hikes interest rates for first time since 2010

SYDNEY (AFP) – Australia’s central bank raised interest rates for the first time in more than a decade yesterday, a pre-election hike designed to tame soaring consumer prices.

The Reserve Bank of Australia raised the main lending rate by 25 basis points to 0.35 per cent, the first increase since November 2010.

Ending record-low rates, the bank said inflation had “picked up significantly and by more than expected” while signalling that “further increases in interest rates” would come.

The move plunged the bank into the centre of a fierce political debate about the health of Australia’s economy, just weeks before a May 21 election.

Prime Minister Scott Morrison, who is trailing in the polls, said he sympathised with mortgage borrowers who would now face rising costs.

But he insisted Australia is faring better than its peers and that rising inflation is a result of worldwide trends.

Like consumers around the world, Australians have been hit by soaring prices for food and fuel. Australia’s annual inflation rate is currently at 5.1 per cent.

But house prices have been rising for years even as wages have stagnated. Sydney and Melbourne are among the most expensive cities in the world to live.

Morrison pointed to the impact of supply chain constraints caused by the pandemic and a war in Ukraine that has caused “the single largest energy shock we’ve seen around the world since the 1970s”.

Container ships are seen as a man fishes at the Port Botany in Sydney. PHOTO: AFP