SYDNEY, July 5 (Xinhua) -- Australia's central bank has lifted interest rates by 0.50 basis points (BPS) on Tuesday, bringing the new rate to 1.35 percent as the country continues to battle rising inflation.

File photo: CGTN

RBA Governor Philip Lowe, in the monthly statement about monetary policy decision, once again said the move was a withdrawal of "extraordinary monetary support" put in place to support the Australian economy during the pandemic.

"The Board expects to take further steps in the process of normalizing monetary conditions in Australia over the months ahead."

Headline inflation in Australia currently sits at 5.1 percent, more than double the rate of wage growth which was at 2.4 percent in the year to Marchm, according to the Australian Bureau of Statistics (ABS).

Lowe acknowledged that this disconnect as well as the increase in mortgage prices were beginning to put pressure on household budgets and presented a "source of ongoing uncertainty" for Australia's economic outlook.

"Although household budgets are under pressure from higher prices and higher interest rates...The household saving rate remains higher than it was before the pandemic and many households have built up large financial buffers," he said.

The Australia New Zealand Banking Group (ANZ) has forecast that inflation would peak at 7 percent in the second half of the year, and the RBA would steadily lift the cash rate to 2.6 percent by early 2023.

Rising interest rates have begun to prompt a correction in Australia's housing market.

Data from property analyst firm, CoreLogic, showed that house prices dropped for their second consecutive month in June with a fall of 0.6 percent nationally.

A number of private banks have forecast that the decline in house prices would continue into the double digits as monetary conditions normalize.