Reserve Bank of Australia lifts interest rates

The Reserve Bank of Australia (RBA) has blunted Melbourne Cup day celebrations for borrowers with a further 25 basis point increase in the cash rate to 3.50 per cent.

The increase, the second in as many months, will lift monthly repayments on an average A$300,000 ($382,555) home loan by around a further $46, assuming retail banks match the central bank's move.

Economists had widely anticipated the increase after Tuesday's monthly RBA board meeting, as the central bank gradually moves monetary policy setting to a more normal level.

RBA governor Glenn Stevens said economic growth is likely to be close to trend over the year ahead and inflation close to the central bank's two to three per cent target.

"With the risk of serious economic contraction in Australia now having passed, the board's view is that it is prudent to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker," Stevens said in a statement.

"The adjustments at the October and November meetings will work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead."

- AAP