The first indication that post-crisis regime of low interest rates is ending has emerged – on the opposite side of the world. Australia’s quarter per cent rise will gradually trigger increases across the rest of the globe.

Australia is the only G20 country to raise rates since the world’s central banks started the programme of concerted cuts last year in their desperate attempt to encourage overborrowed economies to keep borrowing.

Australia slashed its rates from 7.25 to 3 per cent – though that still left them well above the European Central Bank’s 1 per cent, Britain’s half per cent, the US’s quarter per cent or Japan’s rate of just 0.1 per cent. The Australian central bank has decided, however, that despite an already strong currency, now is the time to reverse the trend by returning the official base rate to 3.25 per cent.

The Australian economy has fared better than any other developed country’s, avoiding recession thanks to a large stimulus programme to help the housing market and put cash directly into consumers’ hands. The country was also lucky that its 1990s banking crisis left lenders in no position to take risks like investing in sub-prime mortgages.

And Australia prospered by selling commodities to China’s booming market. Even with coal and metal prices below their best and China’s growth slowing, that is a good export market to support the economy.

Don’t expect the UK of US to increase interest rates yet – their economies are still too frail – but the first signs of higher rates are likely to come next year. It is more likely that other Pacific countries, buoyed by the China trade, will follow Australia, but keep a close eye on Norway – outside the eurozone but inside Europe. If Oslo goes, the pressure for other European increases will rise.

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