Bold warning: Australians may face price rises as Middle East turmoil adds to global economic uncertainty.
A senior Australian official signals that inflation and living costs could climb because of the regional conflict, with Treasurer Jim Chalmers noting that the global economy will influence the May federal budget. He did not provide specific inflation forecasts, but stressed that the situation will be taken into account when shaping policy.
In the aftermath of US-Israeli strikes on Iran, Tehran has responded with missile and proxy attacks, raising the possibility of a broader regional war and tighter oil and gas supplies. Chalmers acknowledged that while conflict in the Middle East is not new, the current escalation effectively involves much of the region, making the economic consequences uncertain but potentially very large. He told reporters in Canberra that the longer the conflict lasts, the greater its impact on Australia’s economy, and that authorities will monitor developments closely.
Reserve Bank of Australia governor Michele Bullock did not rule out a rate increase within March if necessary, but cautioned that it is premature to forecast. She suggested a supply shock could push inflation higher, while a prolonged downturn in energy markets might dampen global demand and inflation overall.
Chalmers reiterated that the government is already prioritising inflation control, noting that price pressures were an issue even before the Middle East actions. He emphasized that the outcome depends heavily on the extent of damage to oil and gas infrastructure, and pointed out that tankers are lingering near strategic routes.
Australia’s economy is expanding at its strongest pace in three years, with a 2.6% annual growth rate reported for the December quarter by the Australian Bureau of Statistics. Chalmers warned there is a real risk that the conflict could lift prices while restraining global growth. He also ordered the Australian Competition and Consumer Commission (ACCC) to keep a close watch on fuel prices, insisting that price movements are expected but not to be exploited by retailers.
Opposition and critics have pressed the government to curb inflation and questioned the spending approach. Shadow Treasurer Tim Wilson argued that the government failed to prepare for foreign price shocks and accused the treasurer of deflecting blame onto regulators rather than taking responsibility.
Chalmers indicated that the May budget would centre on spending restraint, saying the extraordinary global economic uncertainty from the Middle East situation will inform budget decisions. He noted ongoing, late-night discussions with the expenditure review committee as they weigh fiscal options in response to evolving conditions.
