Natural disasters here and abroad were making it difficult to determine how well the Australian economy was performing, the Reserve Bank board has admitted.
In the minutes of its April 5 meeting, released today, the bank's inability to get a clear read of the economic impact of the summer floods on the East Coast and Japan's earthquake and tsunami disaster is clear.
While warning that headline inflation is likely to be "high" for the March quarter, largely because of expensive fruit and vegetables and soaring oil prices, the RBA also found there were signs of softness in Australia especially outside of the mining sector.
The RBA is worried that the mining boom will translate into high entrenched price pressures, but at its April meeting it found it could not justify an interest rate rise.
"Given the outlook for the economy, and in particular the high level of the terms of trade and the prospective further large increase in investment, members considered that this stance remained appropriate so as to ensure that the medium-term inflation outlook remained consistent with the target," the minutes noted.
"Members therefore did not see a case to change the cash rate."
Clouding the picture if the uncertainty over the natural disasters of recent months.
The minutes note that the Japan earthquake and tsunami would cause a disruption for Australian exports, but that the ", the rebuilding effort and a possible increase in use of non-nuclear forms of energy could provide a boost to Australian exports".
The Queensland floods were "complicating" the economic picture.
The RBA found that there were continuing delays in clearing Queensland coal mines of flood waters, which would then reduce Australian exports.
And while the Reserve remains concerned about the inflationary impacts of the mining boom, the evidence of such an impact is not yet present.
"Members noted that a major challenge was whether the economy could accommodate the expected high rate of investment without undue pressure on costs," the minutes noted.
"Outside the resources sector, growth in investment was expected to be relatively modest."The appreciation of the exchange rate was weighing on trade-exposed sectors such as tourism and manufacturing, and subdued consumer spending was affecting prospects for investment in the retail sector."
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