Evidence that economic conditions are quickly returning to normal in Australia drove a decision by the central bank to raise interest rates further at the start of March.
"On balance, members concluded that the evidence that had become available recently had confirmed that it remained appropriate for interest rates to move gradually towards normal levels," minutes of the Reserve Bank of Australia's March 2 board meeting said.
The RBA has already indicated that a normal cash rate is around 4.50% to 4.75%. The RBA noted "significant momentum" in house price growth, solid consumption spending, a pickup in dwelling activity and an expected mining upswing as evidence that a broad-based recovery in the economy is underway. The RBA said that while some weakness existed in the global economy, Asia was strong.
Australia's economy grew by 0.9% in the fourth quarter from the third, bringing the on-year rate of growth to 2.7%. "Some indicators suggested that growth might already have been running at close to trend for a few months," the minutes said.
The RBA remains confident that its forecast of falling inflation by the end of 2010 remains intact. It said falls in private-sector wages growth supported the view inflation would be around 2.5% by year end, down from an expected 3.0% midyear.
The minutes also said the RBA considered at the meeting mounting risks in the global economy, especially the threat of sovereign default in Greece. But the issue was not considered big enough to warrant the suspension of a rate hike in March. Problems in Europe could result in renewed international turmoil, "but while such an outcome could not be ruled out, it was not the most likely one," it said.