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Central bank of Australia upgrades growth forecasts on low interest rates

SYDNEY -- Australia's central bank lifted its economic growth forecasts Friday as the local currency weakens and lower interest rates boost spending, but it sounded a warning on inflation and said unemployment would rise.

The Reserve Bank of Australia said it now expected the economy to expand 2.75 percent in the year to June 30 and between 2.25 and 3.25 percent in the year to Dec. 31. That compares with November's forecasts of 2.5 percent and 2.0-3.0 percent.

“The outlook for the domestic economy is a little stronger over 2014 than at the time of the November statement,” the RBA said in its quarterly monetary policy update.

“The revision reflects, in part, the effect of the lower exchange rate, which is expected to provide some boost to activity in the traded sector.”

But the bank said gross domestic product would only come in at “trend at best” as Australia's decade-long Asia-led mining investment boom unwinds.

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