Economies: Aus Reserve declares end to recession

The Australia Reserve Bank has increased the base rate from 3.0% to 3.25%. And the Treasury says that no one should be surprised.

Australian Treasurer Wayne Swan says ""Australians are smart enough to know interest rates can't stay at emergency levels forever."

But one has to wonder how many Australians consider a base rate of 3.25% to be an "emergency" level when rates in most other G20 countries are at or close to zero.

Australians are used to high interest rates: the 3.25% rate is the lowest for almost 50 years. That has been held only since April this year.

Right from when the global recession began, Australia felt it would avoid the worst of it. Ministers queued up to say that Australia would be Last In, First Out, with a much shallower recession than most.

Yet the economy was battered. Housing figures remain dire ( read story: Australian trade bodies present a generally dismal picture) . Retail sales, however, rose by 0.9% in August, including a 2.4% increase in department stores sales, according to the Australian Bureau of Statistics in a report released last week. It also showed that house prices increased sharply.

That is being seen as a sign that the economy is bouncing. But there are no figures as to whether this is a "spring bounce" and a release of pent-up demand relative to a year of declining sales.

Last week's retail figures bolstered the Aussie Dollar which has been climbing steadily for several weeks.

Australia has moved a month before most commentators expected : it's a small rise, a signal more than a control measure. But for families already on the edge, it will prove to be a blow. How many of them fall into debt will not be accurately measurable for several months.