As feared, Reserve Bank Governor Ian Macfarlane has unveiled a 0.25% increase in the official cash rate to 4.75%.
In a statement released at 9.30am, Macfarlane justifies the decision on recent indicators confirming that the global economic recovery under way since the beginning of the year is continuing, "even though the pace of growth across the major regions is still uneven".
Domestically, he adds that recent economic news has been "predominantly positive", with consumer spending showing robust growth, supported by growth in incomes, ongoing increases in wealth associated with rising house prices, and firmer labour market conditions.
"Business confidence, too, is at a high level, and businesses are reporting a substantial increase in planned investment in the coming year. With the international environment likely to continue improving, conditions overall should remain conducive to growth of the Australian economy," Macfarlane says.
These supposedly buoyant conditions, according to the Governor, have produced an inflation rate "close to the top of the target range", although he notes that, in the short term, the inflation rate is expected to decline moderately, principally reflecting an easing of import price increases.
"However, notwithstanding some dampening influence from the recent appreciation of the exchange rate, inflation pressures appear likely to continue in the longer term, in view of the stronger growth outlook that has emerged in the past few months," he adds.
"Today's action is aimed at reducing the risk of potential imbalances, and thereby promoting sustainable expansion of the economy with low inflation."