The Australian Reserve Bank yesterday lifted its official cash rate by 0.25% to 4.5%, making it now 2% higher than the New Zealand Reserve Bank's 2.5% OCR.
The Australian OCR, which has been increased six times in the last eight months, is now at its highest level since the end of 2008.
Markets had already priced in the increase after surges in consumer price inflation and house prices in the three months ended March.
New Zealand economists are divided on whether the Reserve Bank will lift its rate to 2.75% in June and July, with employment data out tomorrow unlikely to give much of a hint.
For Australian mortgage holders on variable lending rates, yesterday's 0.25% increase will add about $A46 ($NZ58.30) to the average monthly payment for a typical 25-year, $A300,000 home loan, if it is passed on in full by the commercial banks.
"The [RBA] Board expects that, as a result of today's decision, rates for most borrowers will be around average levels," RBA governor Glenn Stevens said in a statement accompanying the decision.
Recently, forecasts for world GDP growth had been revised up again, and growth was expected to be at trend pace or a little above in 2010.
Recent data on Australian inflation confirmed it had declined from its peak in 2008, helped by a noticeable slowing in private-sector labour costs during 2009, the rise in the exchange rate and the earlier period of slower growth in demand, he said.
In both underlying and CPI terms, inflation over the most recent 12 months was around 3%.
"Nonetheless, the extent of decline from here may not be quite as much as earlier forecast and inflation now appears likely to be in the upper half of the target zone over the coming year," Mr Stevens said.
