Australia's central bank has raised interest rates for the first time in almost two years in a bid to curb inflation and protect its booming economy.

Australia's economic growth is outstripping that of most other industrialised countries, with gross domestic product (GDP) up 4% last year.

But low interest rates have led to an increase in house building, soaring house-prices and growing mortgage debt, which the central bank wants to curb.

The Reserve Bank of Australia raised its key overnight cash rate by a quarter of a percent to 4.5%.

'Outperforming'

Interest rates had been at a 28-year low after six rate reductions last year, including two to restore confidence after the 11 September attacks on the United States.

Explaining its decision, the Bank said inflation was nudging the top end of a target range of between 2% and 3%.

Consumer prices rose 2.9% in the first quarter of 2002.

"The Australian economy is at present outperforming other advanced economies by a wide margin...growth has continued and confidence strengthened in 2002 to date," the Bank said.

Mortgage debt fears

But it warned: "The strong rises in house prices seen over recent years have also been associated with a rapid expansion of household debt, a process that carries longer term risk if households become seriously overextended."

House prices rose by nearly 50% in the six months to March 2002, according to Housing Industry Association figures.

Household debt rose 13% to a record level of 559bn Australian dollars ($303bn) in the final three months of last year.

Many economists expect the Bank will raise rates again, perhaps as soon as next month.