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Reserve Bank signals rates on hold

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The impact of recent natural disasters on Australia’s economy has been a topic of hot debate, with some wild forecasts by economists on the impact of economic growth and inflation.

The Reserve Bank has set the record straight, releasing its predictions for the coming year in its latest Monetary Policy statement.

The RBA expects that while there will be negative effects in the short-term, these will be largely cancelled out by the significant growth we will experience as a result of the long-term rebuilding activity that will take place later in the year due to the recent natural disasters.

While the RBA has predicted growth will drop significantly in the short term, it is certainly more optimistic for the second half of 2011. The considerable amount of rebuilding of the damaged areas and communities across Australia will significantly spur on growth across Australia, with forecasts being increased by a half percent to 4.25%.

We are unlikely to see any change to the interest rate in the short term. As the growth across Australia rises in the second half of the year, so to will the interest rate.