TREASURER Wayne Swan says the latest interest rate rise is cold comfort for families and business but is the reality of a strengthening economy.
The central bank today increased the rate by 25 basis points to 4.25 per cent - the fifth increase in seven months - following its monthly board meeting, as expected by a majority of economists.
Mr Swan said the 25 basis point rise was taking interest rates to more normal levels.
"I know that is cold comfort for a lot of families and a lot of people in businesses," he said.
"But that is the reality of a strengthening economy."
Mr Swan said rates were still lower than they were before the global recession.
Someone with a $300,000 mortgage was still paying $500 less per month or $6000 less per year, he said.
Mr Swan pointed out the 4.25 per cent cash rate - following the RBA's latest rate move - was identical to early 2002, before rates were increased 10 consecutive times during the Howard government era.
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"Rates are now at the level that they were when the Liberal Party imposed on Australia 10 rate rises in a row so rates are still at historically low levels," he said.
Mr Swan said he was aware the rise would hurt some but it was a consequence of a growing, strengthening economy.
"The Government understands how tough it can be for someone who is a first homeowner.
"The fact is that rates went to 50 year lows during the global recession and as the reserve bank governor is pointing out today ...they are merely returning to more normal levels," Mr Swan said.
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