Australia raises rates for third straight month

The strength of Australia's mining sector helped it avoid recession

Australia's central bank has raised interest rates for a third month in a row, as the country's economy continues to recover from the downturn.

In a widely expected move, the cost of borrowing increased to 3.75% from 3.5%.

Australia was the only major developed economy to expand in the first half of 2009 and was the first to raise rates.

The central bank governor, Glenn Stevens, said "measures of confidence and business conditions suggest the economy is in gradual recovery".

"The effects of the early stages of the fiscal stimulus on consumer demand are fading, but public infrastructure spending is starting to provide more impetus to demand," he added.

He said there had been signs of improvement in the jobs market and expected unemployment levels to peak at a lower level than had previously been expected.

Analysts said further rate rises were on the cards.

"The level of interest rates is still historically very low," said Craig James at the Commonwealth Bank of Australia. He predicted rates would hit 4.25% by February or March next year.