Stevens has a mandate to keep inflation in a range of 2 percent to 3 percent. In July to September, the consumer price index rose at a quarterly pace of 0.7 percent. It may rise 1.2 percent in the first quarter of this year, according to the median of six estimates in a Bloomberg News survey, compared with a pre-flood estimate of 0.9 percent.

The projected pace would be the fastest since the third quarter of 2008, when the RBA's cash rate target was at 7.25 percent, compared with its current level of 4.75 percent.

GDP growth in the first three months this year will be half as high as the pre-flood forecast, at 0.4 percent, a survey of seven economists showed.

The reconstruction efforts may suffer from skill shortages already straining mining operations, threatening to push up wages for some workers.

While Australian employers added 2,300 workers in December, fewer than forecast by all 17 economists surveyed by Bloomberg, the unemployment rate dipped to 5 percent.

Bank of America Merrill Lynch economists said the RBA would resume raising rates "from the middle of the year, assuming that weather normalizes in about April."

Eoin Treacy's view The Australian floods, which appear to have peaked today, will require a considerable reconstruction. With labour markets already tight and crop losses exacerbating the upward trend in food prices, inflationary pressures are likely to remain a concern for the Australian economy over the medium term. However, in the short-term, interest rates are unlikely to head higher because access to credit will be required to help foster reconstruction.

The ASX200 rallied today to test the upper side of a three-month range within a broader congestion area. The Index has been ranging for more than a year and has sustained an upward bias since July. A break in the progression of higher reaction lows, currently near 4600, would be required to question potential for continued higher to lateral ranging.

The ASX 200 Financials Index broke downwards in May but found support above 4000 and has been ranging below the previous congestion area since June. It is now rallying back towards 4500 and will need to sustain a move above that level to indicate a return to a more demand dominated environment.