The Reserve Bank of
The policy tightening, which was forecast by a majority of economists, follows a pause in February.
The RBA indicated that it will continue to lead Group of 20 countries in removing stimulus from the economy, saying that the latest rate rise is just another step in a process of raising rates back to normal.
"The board judges that with growth likely to be close to trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average. Today's decision is a further step in that process," RBA Governor Glenn Stevens said.
Major commercial banks said following the RBA move that their lending rates are again under review. Treasurer Wayne Swan said that banks won't be justified if they continue the recent practice of raising lending rates by more than the RBA hike.