Australia Interest Rate Now 4%

Australia lifted its benchmark interest rate by 0.25 percentage point to 4 per cent and warned it would continue to rise as growth gets back on track and unemployment stabilises after the financial crisis.

"The board judges that 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," Reserve Bank of Australia (RBA) governor Glenn Stevens said.

"In Australia, economic conditions in 2009 were stronger than expected, after a mild downturn a year ago. The rate of unemployment appears to have peaked at a much lower level than earlier expected," the bank said.

Treasurer Wayne Swan acknowledged the pain that home-owners face as mortgage payments rise but said Australia's economy, dubbed by analysts "the wonder from Down Under", was "the envy of the world".

Analysts, who had been divided on whether the RBA would raise rates again, were expecting another three rises this year to ward off inflation as growth ticks upwards and unemployment drops further from the current 5.3 per cent.