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 labour market.

"While the floods in eastern Australia are expected to have a material effect on the near-term quarterly profile of economic activity, the medium-term outlook for the economy is broadly unchanged," the Reserve Bank of Australia said in its quarterly Statement on Monetary Policy.

"Growth in the June quarter is forecast to be boosted as coal production recovers and as households and firms in flood-affected areas begin to replace damaged household items and machinery and equipment."

The floods, spawned by a weather pattern known as La Nina, caused billions of dollars of damage and 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 in 2011, with growth expected to hit 3.25 percent in mid-2011, 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 4.0 percent over the period to June 2013.

Underlying inflation was expected to stay below 3.0 percent -- the top end of the central bank's interest rate-sensitive target band -- until the December quarter of 2012.

The analysis does not take into account the impact of Cyclone Yasi that hit Queensland on Thursday.

The RBA noted however that its upbeat forecast could be derailed as the impact of the extreme weather is an "important source of near term uncertainty".

"The full extent of damage to public infrastructure and private property is yet to be determined," it said.