Recovering Aussies set to lead world by raising interest rates

Australia was today tipped to be the first major economy to raise interest rates since cutting them to record lows amid signs its recovery is gathering pace.

The Australian dollar climbed as investors bet the Reserve Bank of Australia (RBA) will raise interest rates from 3% to 3.25% tomorrow.

If Australian rates were to rise it would be the first of the Group of 20 nations to start taking back some of the extraordinary stimulus doled out in the global crisis.

"The RBA is no longer comfortable with the story that its darkest hour' rate remains appropriate for today's brighter circumstances," said Macquarie strategist Rory Robertson.

The market had been pricing in only a one-in-five chance the central bank would hike so soon.

But today the Australian Financial Review and Sydney Morning Herald both reported a move to 3.25% is likely tomorrow.

A sound banking system and demand from China for Australia's commodity exports has kept the economy resilient.

Australia was the only developed nation to grow over the first half of this year.