Australian interest rates set to rise

Australia's Reserve Bank Board is expected to approve a quarter of a per cent rise in official interest rates today.

A formal announcement will be made tomorrow, bringing the rate to 5.5 per cent, compared with New Zealand's 6.5 per cent.

The rate has been steady at 5.25 per cent since December 2003.

Economist Craig James says there has been a last minute rush of people wanting to fix their mortgage rates. However, he says many people will stick with a variable rate as the economy tends to even out over a cycle.

Mr James says any upward movement will stretch home-owners as their mortgages become more expensive, but most people have factored in to their finances that interest rates were likely to rise - they will be just be working on tighter household budgets in future.

Some economists say Australia's interest rate could rise as high as seven per cent as this is forecast to be the first of several rises.

- NEWSTALK ZB