Australia's central bank chief on Thursday set out an aggressive plan for further rate rises, warning a "timid" approach could jeopardise the quickest recovery in the developed world.

Reserve Bank of Australia (RBA) governor Glenn Stevens, who stunned markets last week with the first hike in an advanced economy since the financial crisis, said interest rates should stay ahead of the curve.

"Australia has had an experience that, even if labelled a recession, was a pretty mild one," he told a forum in Perth.

"That is, clearly, a good outcome in the circumstances. Now that the risks of really serious economic weakness have abated, however, the question arises as to how to configure monetary policy for the recovery."

Stevens said Australia should learn from its success in slashing rates from 7.25 percent to 3.00 percent, a five-decade low, before lifting them 25 basis points on October 6.

The surprise decision boosted markets around the world as investors cheered Australia's vote of confidence that the worst crisis since the Great Depression was ending.

"If we were prepared to cut rates rapidly, to a very low level, in response to a threat but then were too timid to lessen that stimulus in a timely way when the threat had passed, we would have a bias in our monetary policy framework," Stevens said.

"Experience here and elsewhere counsels against that approach."

He expressed optimism that Australia had seen off the worst of the slump but said rates needed to pre-empt economic conditions, as they take time to take effect.

"The period of greatest weakness in the Australian economy is probably past. Barring another serious international setback, the economy is likely to continue on a path of gradual expansion during 2010," Stevens said.

"That being so, those of us involved in monetary policy must turn our thoughts to encouraging the sustainability of that expansion. This is particularly the case for monetary policy given the lags in its impact."

Australia's monetary policy, together with large-scale economic stimulus, is credited with helping it become the only major Western economy to avoid recession during the crisis.