Australia hikes interest rates for first time since 2010

SYDNEY

Australia's central bank raised interest rates for the first time in more than a decade yesterday, a pre-election hike designed to curb soaring consumer prices.    

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

Ending record-low rates, the bank cited inflation levels that had "picked up more quickly, and to a higher level, than was expected".     

The move thrusts the bank to the centre of a fierce political debate about the health of Australia's economy just weeks before the May 21 elections.     

Prime Minister Scott Morrison, who is trailing in the polls, has insisted inflation is a result of worldwide trends, including the war in Ukraine. 

The annual inflation rate is currently at 5.1 percent.     

Like consumers around the world, Australians have been hit by soaring prices for food and fuels. But house prices have been rising for years even as wages have stagnated. Sydney and Melbourne are among the world's most expensive cities in the world to live in. 

The rate rise is expected to be the first of several, which could have serious implications for Australia's once-perennially growing economy.    

Higher interest rates will spell higher borrowing costs for millions of already heavily indebted Australians, in a country where real estate market speculation at times appears to be a national pastime.    

Interest rates of two percent would cost the average homeowner about US$362 a month, according to the financial services website RateCity.com.au.