The Australian economy would go through a phase of soft activities for the first six months of 2011, mainly due to the devastations wrought by the Queensland floods, but the Reserve Bank of Australia (RBA) maintained that a sweeping rebound will be seen by the second half.

The impacts of the disaster are closely considered by the RBA, as shown on its policy statement for February, yet the central bank's immediate concern is managing the upcoming mining boom and the expected shortage on skilled labour.

The RBA said that a lull may be seen by the economy for the first half of the current year but that would completely change as reconstructions accelerate and the mining sector flexes its muscle, with its growth further fuelled by rising commodity prices.

RBA governor Glenn Stevens said on Tuesday that inflation forecast are relatively lower for the immediate term but by the end of the year, its target band may be breached by rising levels but he noted that "the focus of monetary policy will remain on the medium-term prospects for economic activity and current monetary policy remains appropriate for now."

The February cash rate simply sustained the previous level of 4.75 percent and such may be the case for the first half yet for the last six months of the year, further interest rates could be implemented, according to Stevens, as the country's terms of trade tallies record numbers and economic expansion further heats up due to increasing coal and iron ore exports that were continuously pushed up by China.

Growth, the RBA said, will soften a bit to 3.25 percent by mid-year, coming from the November forecast of 3.5 percent while inflation is thought to reach 3.0 percent in the same period as against to the 2.75 percent projection last year.

While the central bank could not give out any specific impact assessment from cyclone Yasi, it conceded that damaged crops would surely lead to higher food prices though it expressed confidence that most consumers carry enough buffers for such scenarios due to their increasing savings, which have been the trend for quite some time.

Overall, while uncertainties still hover around in the medium-term, the RBA points to rosy pictures that may abound in the latter part of 2011 as mining investments further shoot up and more job creations occur, which are rightly anchored on a strengthening global economy and a US economy slowly moving its way through recovery.