Australia raises growth forecasts

The growth will come from demand for iron ore and coal, the RBA said

The Reserve Bank of Australia (RBA) has said that the country's economy is growing faster than had been expected.

It has raised its 2009 growth forecast from 0.5% to 1.75% and increased its 2010 forecast from 2.25% to 3.25%.

Last month, Australia became the first G20 country to raise its interest rate, taking it from 3% to 3.25%, with a further quarter-point rise this month.

It was one of the few economies to avoid recession, having only contracted in the last three months of 2008.

The RBA' s quarterly Statement on Monetary Policy said that interest rates would have to rise gradually as the economy expanded.

'Big picture positive'

"The RBA here is foreshadowing years of expansion based on resources, population and Asian demand," said Su-Lin Ong, senior economist at RBC Capital Markets.

"It's big-picture positive for Australia and the Australian dollar, and means rates are going nowhere but up."

The Australian dollar has been gaining strongly against the euro, the US dollar and sterling. This week has seen the US Fed, European Central Bank and Bank of England all keep their interest rates unchanged at very low levels.

The RBA said the country's growth would be based on strong demand for its resources such as coal and iron ore, especially from India and China.