The Reserve Bank of Australia has increased the official cash rate for the first time in 19 months.
The bank lifted the rate by 25 basis points to 3.25%, after holding it at a 49 year low of 3% since April.
The ABC reports that the Reserve Bank Governor Glenn Stevens says the Australian economy has rebounded better than expected from the global financial crisis.
In the latest statement on monetary policy, Mr Stevens says there have been solid gains in housing credit and prices and lower than expected unemployment.
He also says growth in China has been very strong, which is having a significant impact on other economies in the region.
But he notes that economic growth in other major countries is likely to be modest during 2010.