Inflation jumps to 4.6% in Australia as Iran war fuel shock begins to bite | Australian economy
Inflation jumped to 4.6% in March from 3.7% in the previous month; Treasurer Jim Chalmers has warned that this is the beginning of a fuel shock linked to the Iran war that will ripple through the economy in the coming months.
With consumer prices rising at the fastest pace in two and a half years, financial markets are betting that the Central Bank will raise interest rates for a third consecutive meeting next Tuesday, as authorities struggle to manage the nightmare scenario of containing inflation as growth is expected to slow sharply.
Ahead of next month’s budget, the treasurer said “inflation is likely to peak higher than that” as he reassured Australians the economy was well placed to recover from the effects of the war.
“We have low unemployment, we have solid wage growth and so we have pretty good fundamentals as we face this period of increased uncertainty in the global economy,” he told reporters in Brisbane.
The international oil price rose above US$110 a barrel overnight as hopes faded for an end to the US-Israeli-instigated conflict that has blocked the Strait of Hormuz, a critical artery for the global flow of oil and other key commodities such as fertilisers.
According to the latest figures from the Australian Bureau of Statistics, fuel costs rose 33% in the month; but that was before the 26-cent cut in the gas tax.
Eliminating the impact of large price fluctuations (electricity prices had also risen sharply a year earlier due to the end of government rebates) showed headline inflation remaining steady at 3.3%; This is an encouraging sign that inflationary pressures are easing in March.
The data also showed that annual inflation, measured in quarterly figures rather than new monthly figures, rose to 4.1% from 3.6% in December.
Analysts predict that consumer price increases will continue to increase from here as the increase in gasoline and diesel costs is reflected in the prices of other goods and services.
Before the latest data was released, Westpac economists expected inflation to rise as high as 5.8% in May and fall to just 4.7% by the end of this year.
Latest data confirms that living costs will be at the top of the government’s agenda in the May 12 budget.
Labor has halved fuel duty for three months and announced a GST cut on petrol and diesel; This has helped cushion the blow to motorists from rising pump prices.
Economists warn of more untargeted costs–related to–Life support risks complicating the RBA’s fight to get inflation back under control.
