Australia contemplates rate hike

SYDNEY, March 3 (UPI) -- Economists down under said Monday the Reserve Bank of Australia has little choice but to raise key lending rates to try to get a handle on inflation.

Prime Minister Kevin Rudd has said fighting inflation is a top priority, The Australian reported.

Under discussion is a 25-basis-point increase that would kick the rate banks use to loan each other money to 7.25 percent and increase many mortgage rates to 9 percent.

The rate hike would be the bank's 12th consecutive rate hike, bringing the rate to a 13-year high.

To help combat inflation and a housing shortage, Rudd also has proposed investing tax breaks to help investors build up to 100,000 new low-rent housing units in the next 10 years and $500 million to help defray the costs of water, road and sewage infrastructure.

"You would think a rate rise would have a negative impact on the economy and that's just the point," said James Foulsham head of sales trading at CMC Markets. "The RBA is trying to get spending down."