Reserve Bank governor Glenn Stevens also reiterated during three hours of questioning by the House of Representatives economics committee, he does not have a problem with the amount of government debt on issue.
The central bank now expects the consumer price index (CPI) will be about three per cent by June, and the top of its inflation target.
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This was a quarter of a percentage point higher than predicted in last Friday's quarterly statement on monetary policy, which, due to its timing, was not able to give an impact assessment from Cyclone Yasi.
"There has clearly been a very substantial impact and a big rise in the prices of some fruits is already occurring, on top of the increases in prices for some foodstuffs as a result of the earlier flooding," Mr Stevens told the hearing in Canberra on Friday.
However, he said very early intelligence suggests that the damage to crops may not as great as occurred with Cyclone Larry in 2006, and that recovery of some crops might be a bit faster than then.
Still, this spike in prices will be temporary and should have "largely dissipated" by the end of the year.
Economic growth will also be noticeably lower than it would otherwise have been in the December and March quarters, and will be a percentage point lower than the central bank's pre-flood forecast.
"After the initial recovery in production over the next few months, the process of rebuilding damaged structures, accommodated in part by deferral of some other spending, will see a modest increment to demand over the coming year or two compared with what we expected three months ago," Mr Stevens said.
He does not believe Australia has a debt problem and said the current amount of government debt was manageable in a $1 trillion-plus economy, even taking into account additional spending on post-disaster rebuilding.
"We have never really said that the size of public debt on issue per se in this country is in itself a problem, anytime, for quite a long time," Mr Stevens said.
