The Perth City Council is to raise its rates by an average of 5.1 per cent.

The rate increase is contained in the City's budget which was handed down last night.

Part of the extra revenue raised will be used to fund a new $27 million library and plaza project on Hay Street, the biggest civic project undertaken by the council in 40 years.

The Council also approved $12.8 million dollars for the Perth City Link project, $11 million for streetscape enhancements and $1.3 million for a new car park development.

Lord Mayor Lisa Scaffidi says the City is in a strong financial position, but the rate increase is necessary

"Based on the forecast population growth there is never a better time than now to create these projects, they are only going to increase in cost and we need to have them now, in fact we probably should have had them before," she said.

Ms Scaffidi has described the rate increase as 'modest'.

"I think you'll find that a lot of other local government authorities are on par or even higher than ours so we're very considerate of the stress that might cause some ratepayers but it's pretty fair across the board," she said.