* RBA chief says normal rate much higher than current 3 pct
* Governor Stevens says rates will be raised eventually
* Aussie rises to 11-month high, November bill futures fall (Adds more comments, analyst comments)
By Anirban Nag
SYDNEY, Aug 14 (Reuters) - Normal interest rates for Australia would be noticeably higher than the current 3 percent cash rate, the country's central bank governor said on Friday, sending the Australian dollar to a 11-month peak.
In a sign that Australia could be the first major developed nation to raise rates, Reserve Bank of Australia Governor Glenn Stevens told parliament that rate increases would be made in an orderly fashion.
The central bank slashed Australian rates to record lows as as it moved to cushion the economy from the global financial crisis, but recent strong data has prompted it to drop its easing bias, setting the stage for eventual rate rises.
"It's (normal rate setting) a good deal north of what the cash rate is now," Stevens said during semi-annual testimony to parliament.
"I don't want to endorse a particular number because that, I think, would trigger all sorts of excitement out there. We shouldn't have a dogmatic opinion about exactly where this so-called normal is, because for a start it's not necessarily a constant."
The Australian dollar
Financial markets
"Stevens' comments were decidedly upbeat," said Su-Lin Ong, senior economist at RBC Capital.
"As we have been arguing, the abnormally low level of cash rates is becoming increasingly inappropriate against the improving global backdrop and upside surprises in the local data." Analysts are more cautious than markets and in a July 31 poll most of them predicted the first rise to come in the first half of 2010, though Stevens said he did not want to give a particular steer on when any change of policy might happen.
"On the timing of when we might adjust policy, that's an issue about which one keeps an open mind at this point, obviously," he said.
"When we reach the point of judging that this exceptional degree of stimulus isn't needed, it will be the right thing to do to start removing it before it's excessive for too long."
Central banks around the world have begun debating how and when to phase out the emergency steps to contain the damage wrought by the worst global financial crisis in 80 years, but most are not expected to do so until well into next year.
Stevens said the current policy setting was an emergency measure and would be unwound as the economy recovers.
"As the set of risks that you think you face start to shift, now at some point you are going to have to make a response to move way from the emergency setting," he said.
Last week, the central bank moved to a more neutral bias from an easy policy stance after a raft of economic data reinforced its view that the economy is well on the road to recovery and the slowdown was not as bad as it had expected.
Still, Stevens retained a degree of caution about rushing into raising rates, adding there was still a possibility that the Australian economy could contract in coming quarters and that consumer demand might wane.
Both consumer and business confidence have risen to near two-year highs while retail sales and job numbers have surprised on the upside.
(Additional reporting by Wayne Cole and James Grubel in Canberra; Editing by Jonathan Standing and Tomasz Janowski)