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Australia's economy grew more sluggishly than expected in the third quarter as a weak trade account and retreating government stimulus dragged down overall activity. GDP rose 0.2% in the third quarter from the second quarter and rose 0.5% from a year earlier, the Australian Bureau of Statistics said.

Economists on average had expected a 0.4% rise on a quarterly basis.

Australian lawmakers approved a controversial plan to change the way employee share schemes are taxed.

The schemes proposed taxing employee share schemes when employees are granted discounts or options on shares, rather than when they vest - that is, when employees take ownership of the shares or sell them.

"With the reform to the taxation of employee share schemes, the government will better target eligibility for the tax concessions and reduce opportunities for tax avoidance," Assistant Treasurer Nick Sherry said in a statement.

The RBA raised its cash rate target by 25 basis points to 3.75%.

The latest policy tightening entrenches the RBA's position as the only central bank in the Group of 20 to be raising interest rates, with financial markets expecting more increases in early 2010 as other country's cash rates close to zero.

Australian new home sales fell 6% in October, the Housing Industry Association said.

The survey of major home builders showed its second consecutive monthly fall as the impact of government efforts to stimulate demand in the sector fade, HIA said in a statement.

Australian wages excluding bonuses rose 0.7% in the third quarter of 2009 from the second quarter and rose 3.6% from a year earlier, Australian Bureau of Statistics labour price data show.

Economists surveyed ahead of the announcement on average forecast a rise of 0.7% over the quarter and 3.6% from a year earlier.

The index measures movement in underlying wages by calculating the change in the wage and salary cost of a basket of jobs.

The Reserve Bank of Australia flagged further gradual increases in interest rates, but said it is unsure how quickly it will make the policy adjustments.

The comments are likely to raise doubts about whether the RBA will continue to raise rates at its next policy meeting Dec. 1, leaving economic data issued since the November meeting as crucial in determining the need for a hike in December.

Australian consumer confidence fell in November for the first time since May, the mood soured by rising interest rates and a higher gasoline prices. But Bill Evans, chief economist at Westpac, said the fall in sentiment was modest given that it follows consecutive interest rate increase.

The total number of Australian houses and apartments approved for construction rose a seasonally adjusted 2.7% in September from August, the Australian Bureau of Statistics said.

Economists had expected on average that total residential building approvals rose 2.0% from the month before. Private-sector house approvals rose a seasonally adjusted 0.3% from a month earlier and rose 18.6% from a year earlier, the ABS said.

Australian retail sales fell 0.2% to a seasonally adjusted $19.72bn in September from $19.75bn in August and rose from $18.60bn a year earlier, the Australian Bureau of Statistics said.

Economists surveyed ahead of the announcement on average had expected a 0.4% rise in sales for September. Sales had risen 0.7% in August on month.

Australia's central bank raised interest rates for the second time in as many months as a rapidly improving economic outlook called for a further gradual withdrawal of emergency policy settings.

In a busy week of central bank meetings around the world, the hike affirms the Reserve Bank of Australia's willingness to act alone and tighten policy settings while rates in other Group of 20 economies remain stuck at close to zero.