A senior Reserve Bank of Australia official says the economy is expected to continue to benefit from Asia's demand for resources for some time, while pressures on supply could add to inflationary forces.
The bank's assistant governor Philip Lowe said, despite the recent setbacks on financial markets, the overall outlook for Australia was a "positive one".
Dr Lowe says Australia's major trading partners are growing solidly, commodity prices are high, and domestic income is likely to grow strongly over the year ahead.
He says a major challenge will be to expand the supply side of the economy so that demand can grow solidly without adding to inflation.
Dr Lowe says higher commodity prices are behind the bank raising its forecasts for economic growth to between 3.75% to 4% for the two years following 2011.