Responding to the bigger-than-expected rate increase by the Reserve Bank of Australia (RBA) on Tuesday, Australia’s Prime Minister Scott Morrison said that Australians have been preparing for a rate hike for some time.

His comments come after the RBA hikes the Official Cash Rate (OCR) for the first time in 11 years by 25 bps to 0.35% as against the market's expectations of a 15 bps increase.

PM Morrison's conservative government is seeking a rare fourth three-year term at elections on May 21. By delivering a rate hike ahead of the election, the RBA has managed to preserve its credibility as an independent institution.

Market reaction

AUD/USD was last seen trading at 0.7115, up 1% on the day, awaiting Governor Phillip Lowe’s press conference at 6 GMT.