Australian consumers must brace for higher commodity prices as the extensive damage of the torrential rains and storms would impact on the domestic food supply in the coming months.

This was the warning given by government and private sector economists led by the assistant governor of the Reserve Bank of Australia (RBA) Philip Lowe.

Mr. Lowe told reporters yesterday that the recent floods, combined with the damage caused by tropical cyclones, could put further pressure on food prices as measured by inflation in the coming weeks.

In a related report posted on mozo.com.au, Mr. Lowe was quoted saying: "The Bank now expects CPI inflation to be around three per cent over the year to June 2011, with the combined effect of floods and the cyclone likely to contribute around 0.5 percentage point to this outcome."

The central bank said last week state economists predict inflation to stand at 2.5 per cent for the 12 month period to the end of 2011.

A similar view is taken by the economists of the National Australia Bank. According to an emailed analysis of NAB economists led by Mr. Alan Oster, food prices are seen rise sharply in the March quarter following the reduction in supplies of fresh fruit and vegetables.

"We anticipate a ballpark impact of around 3⁄4% on the March quarter headline CPI. The RBA will ignore this temporary effect and focus on underlying inflation, which is expected to edge up as commodity income continues to flow and reconstruction begins," the NAB said.

This pressure on consumers will further discourage the RBA from increasing benchmark interest rates and support the value of the Aussie dollar.