Less than an hour after the unprecedented third consecutive monthly rise in the cash rate to 3.75 per cent, Westpac said it would increase its standard variable home lending rate by 45 points to 6.76 per cent. The rise will cost an average home owner with a 25-year, $300,000 mortgage an extra $84 a month.

Westpac said it had sheltered customers from the rising cost of lending during the economic crisis and it was now time to pass on some of those costs. However, home owners were asked to bear the most pain, with business loan rates going up by only 0.25 per cent, while credit card rates would increase between 0.25 and 0.35 per cent.

Treasurer Wayne Swan declared Westpac's announcement a slap in the face for its customers and accused the bank of cynically hiding behind the cover of other distractions in federal politics.

''I think Westpac and any other bank that follows Westpac's lead can expect a very severe backlash from their customers and from the community generally,'' Mr Swan said.

In announcing the RBA decision, governor Glenn Stevens all but declared the economic crisis over, predicting good growth for 2010, lower than expected unemployment and a noticeable recovery in household wealth.

''In Australia, the downturn was relatively mild and measures of confidence and business conditions suggest that the economy is in gradual recovery,'' Mr Stevens said.

Worries about the international impact of Dubai World's $US59 billion ($A64.5 billion) debt crisis failed to shake the bank's confidence, with Mr Stevens noting that while the high Australian dollar would damp exports, the cost to business of borrowing money continued to fall. AMP head of investment strategy and chief economist Shane Oliver said home owners could expect to see several more rises in the new year as the RBA moved closer to a normal level around 5 per cent.