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Stephen Walters, the only economist surveyed by Bloomberg News to predict yesterday’s rate increase by Australia’s central bank, was convinced more than a month ago that Governor Glenn Stevens was ready to move.

“To me it was pretty straight forward,” said Walters, chief economist at JPMorgan Chase & Co. in Sydney. “Stevens said a month ago that a benchmark rate of 3 percent was no longer appropriate, so if you’ve got to move, why wait?”

Governor Stevens raised the overnight cash rate target from a half-century low to 3.25 percent from 3 percent yesterday, making Australia the first Group of 20 nation to increase borrowing costs since the height of the global recession.

Another 19 economists surveyed late last week predicted Stevens would keep the benchmark rate unchanged for a sixth month, saying he needed more time to gauge whether the nation’s economic recovery was robust enough to absorb higher borrowing costs. The surprise increase pushed Australia’s currency to the highest level in 14 months.

“It’s worth remembering that Australia is out in front of the rest of the world — we have a strong economy, we export to China and we have a banking system that’s not fractured,” Walters said in a telephone interview today.

Stevens, who slashed borrowing costs by a record 4.25 percentage points between September 2008 and April, signaled in August that the bank’s “emergency” setting wouldn’t be appropriate as the economy strengthens.

Earliest Opportunity

“There will come a time when the exceptional monetary stimulus in place at present will no longer be needed,” Stevens said in his half-yearly testimony to parliament’s economics committee on Aug. 14. A more normal level for the benchmark rate is “a good deal north” of 3 percent, he added.

Once Stevens signaled monetary policy was no longer appropriate “it made sense to change at the earliest opportunity,” said Walters, who has headed JPMorgan’s Australian economic analysis team since 2004. “So we made the call about a month ago. It wasn’t about reacting to data.”

Walters, a former staffer at the West Australian government’s Treasury Department who holds a masters degree in applied finance from the University of Melbourne, said he “started to think ‘what are other seeing that I’m not’,” when his peers predicted rates would remain unchanged.

“And to be honest, it was a close call. Stevens could have waited until November,” Walters said.

JPMorgan expects policy makers will raise borrowing costs by another quarter percentage point in December, and take the benchmark rate to 4.5 percent by the end of next year’s third quarter. Walters says Stevens will pause next month.

Again, he is at odds with most of his peers. Twenty-one of 23 economists surveyed by Bloomberg today said Stevens will raise the cash rate target by a quarter point on Nov. 3.

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