"A large expansionary shock" is the stark phrase the Reserve Bank of Australia picked to rationalise its increase in the cash rate by 25 basis points, to 4.75 per cent, yesterday. That expansionary shock is the rise in the terms of trade, which has boosted Australia's export income and which most analysts expect to stoke the Australian economy over the next two years. The timing of the decision surprised the markets and commentators, coming after the RBA held rates steady in October against most expectations. On the other hand, the decision suited investors in bank shares, who bid shares in Commonwealth Bank up 1.8 per cent, Westpac up 1.1 per cent and ANZ up 0.5 per cent. Shares in NAB were flat over the day, indicating the market expects NAB to take an independent line on home loan pricing. The argument by the RBA for the lift in rates is that "notwithstanding recent good results on inflation, the risk of inflation rising again over the medium-term remains." The RBA cited global growth in line with the trend, firm commodity prices and rising job vacancies and wages, which means that "the moderation in inflation that has been underway for the past two years is probably now close to ending." The bank did not mention the weak tax receipts announced on Friday by Treasury, and described its own weak credit data, released the same day as "subdued". The RBA instead noted "evidence of some greater willingness to lend". "The economy is now subject to a large expansionary shock from the high terms of trade and has relatively modest amounts of spare capacity," the statement concluded.