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Rates on hold till Q3

The recent flood disaster could stop the Reserve Bank from lifting rates until the third quarter of the year.

According to National Australia Bank’s Monthly Business Survey, released yesterday, the Board could postpone the next rate hike until well after May because of the flood disruption.

“The RBA will be watching cost pressures during reconstruction phase. But while the floods may force the Board to delay the next rate hike, NAB still expects the official cash rate to peak at 5.25 per cent by August 2011,” NAB’s chief economist Alan Oster said.

Mr Oster said buyer confidence had dropped dramatically in the aftermath of the natural disaster, but preliminary indications suggest confidence is starting to rebound nationally.

As such, Australian growth forecasts remain presently unchanged.

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