Australia’s robust economy will overcome the impact of catastrophic floods by the second half of the year as coal exports from deluged Queensland state recover, the central bank said yesterday.
The bank said it would “look through” the effects of flooding in coal mining-rich Queensland state over the past six weeks and keep policy focused on containing the country’s mining boom and a fast-tightening labor market.
“The medium-term outlook for the economy is broadly unchanged,” the Reserve Bank of Australia (RBA) said in its quarterly Statement on Monetary Policy.
The floods were expected to cut economic growth by 0.5 percentage points in the December and March quarters, the RBA said, but the economy will bounce back later this year, with growth expected to hit 3.25 percent by the middle of the year, down only slightly from a November forecast of 3.5 percent.
The bank left its forecasts for growth and inflation broadly unchanged, projecting economic growth at an above-average pace of around 3.75 to 4 percent over the period to June 2013. Underlying inflation was expected to stay below 3 percent until the December quarter of next year.
The analysis does not take into account the impact of Cyclone Yasi that hit Queensland on Thursday. However, the RBA said that its upbeat forecast could be derailed as the impact of the extreme weather is an “important source of near term uncertainty.”