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Fearing Inflation, Australia Raises Interest Rates

Australia's central bank has raised borrowing costs to their highest level in five years and Singapore Telecommunications reports a surge in net profit.

The Reserve Bank of Australia increased its benchmark interest rate by a quarter of a percentage point to 5.75 percent, raising borrowing costs to the highest level in five years.

The move came after the country's annual inflation rate reached three percent in the first quarter. The bank said it wanted to act on inflationary pressures that have been fueled by above average global economic growth and soaring income from commodity exports in Australia.

Prime Minister John Howard, whose party won an election in 2004 by promising to keep interest rates low, defended the rate hike amid strong criticism from the opposition Labor party.

"Well, nobody ever likes interest rates going up, unless you're a lender," said Mr. Howard. "I think it's fair to say though that the Reserve Bank obviously saw some signs of inflationary pressure and has decided to take pre-emptive action in relation to that."

The International Monetary Fund predicts an economic growth of seven percent across Asia for this year, matching last year's regional economic performance.

In its latest economic outlook for the region, the IMF says the region's economy has been boosted by rising domestic demand and a surge in exports. But it warns a number of significant growth risks remain. These include current account imbalances, higher interest rates and spiking oil prices.

Singapore Telecommunications, Southeast Asia's biggest telecoms group, reported a 61 percent year-on-year rise in fourth-quarter net earnings. Net profit was more than $1 billion.

SingTel says the growth was mainly driven by its investments in mobile phone operations in Asia, especially Bharti in India and Telkomsel in Indonesia.

Because Singapore is a small and saturated market, regional expansion has become SingTel's main source of growth in recent years.

South Korea's largest automaker, Hyundai - whose chairman was recently arrested on corruption charges - said its net profit fell almost 38 percent in the first quarter compared with a year earlier. The company said it earned $340 million in the first three months of this year.

The company said a strong won, the South Korean currency, eroded export income.