The Reserve Bank has raised the official interest rate to 0.35 per cent, the first time since 2010 and just three weeks out from the federal election.
Following its May board meeting, RBA Governor Philip Lowe confirmed the 0.25 percentage point increase.
"The Board judged that now was the right time to begin withdrawing some of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic," Mr Lowe said.
"The economy has proven to be resilient and inflation has picked up more quickly, and to a higher level, than was expected. There is also evidence that wages growth is picking up.
"Given this, and the very low level of interest rates, it is appropriate to start the process of normalising monetary conditions," he said.
He also pointed to the strong labour market and positive economic outlook for Australia.
"The resilience of the Australian economy is particularly evident in the labour market, with the unemployment rate declining over recent months to 4 per cent and labour force participation increasing to a record high. Both job vacancies and job ads are also at high levels.
"Household and business balance sheets are generally in good shape, an upswing in business investment is underway and there is a large pipeline of construction work to be completed."
Many commentators had been expecting the rise.
"The 5.1 percent inflation rate shocked the markets and made an increase in the Reserve Bank cash rate near inevitable this month," said Canstar finance expert Steve Mickenbecker.
"At 0.25 percent it is at the midrange of expectations, lifting the cash rate to 0.35 percent."
And it will effect peoples mortgages very soon.
"It won't take long for borrowers to se their rates move with the expectation lenders will increase variable rates within days," Mr Michenberger said.
"The banks will pass on the Reserve Bank cash rate increase to existing borrower4s who have been immune to the rapid rise of fixed interest rates of recent months.
"Only those who still have time left on their fixed rate loan term will be spared."
