Why Australia Raised Rates Again

Australia raised rates again by another 25 basis points overnight. The reasons the Reserve Bank of Australia gave for the rise are:

The global economy has resumed growth. With economic policy settings likely to remain expansionary for some time, the recovery is likely to continue during 2010 and forecasts have been revised higher. The expansion is generally expected to be modest in the major countries, due to the continuing legacy of the financial crisis. Prospects for Australia’s Asian trading partners appear to be noticeably better. Growth in China has been very strong, which is having a significant impact on other economies in the region and on commodity markets. For Australia’s trading partner group, growth in 2010 is likely to be close to trend.

The key point from the media release from the Reserve Bank seems to be that the Australian economy is getting a boost from Asian trading partners (especially China).

They went on to say:

Sentiment in global financial markets is much better than earlier in the year. Nonetheless, the state of balance sheets in some major countries remains a potential constraint on their expansion.

Any guesses which countries they may be thinking of?? The full text of the RBA announcement can be found here.