Aussies warned of price hikes long after conflict ends
Consumers have been warned to expect months of higher fuel and case prices even if the U.S. war against Iran ends immediately.
Relief from crippling fuel costs began to arrive after the federal government temporarily halved taxes on gasoline and diesel; states also agreed to unexpectedly transfer the expected GST due to the increase in sales.
But the total savings of more than 30 cents per liter could not fully offset the impact of expensive global oil due to the leakage of shipping supplies from the Strait of Hormuz, which is effectively blockaded by Iran.
David Ubilava, an economics professor at the University of Sydney, said that even after the US-Israeli conflict with Iran ends, it will take some time for supply chains to return to their pre-war state.
“Market disruption and war have lasted so long that their effects will be felt for months,” he told AAP.
“Not only will the price of fuel increase, but transportation costs will also increase, and deliveries, groceries, and restaurants will become more expensive as a result of fuel surcharges as these costs are passed on to the consumer.”
US President Donald Trump has repeatedly suggested that US-Israeli attacks on Iran could end within a few weeks, and recently said his military goals would be achieved in a very short time.
But Australian government figures acknowledge that even if the war ends quickly, the effects of the war will remain.
Deputy Secretary of State Matt Thistlethwaite said on Sunday that the flow-on effects on fuel prices and inflation would be “long-tailed”.
“If (the war) ended tomorrow, it would have effects for months to come, but we are planning for that,” he said.
Assoc. Dr. Ubilava said the long-term inflationary impact of the war could mean higher interest rates as the Central Bank tries to reduce household spending.
While the volatile situation makes forecasting difficult, he said it is difficult for the price of crude oil, currently near US$110 per barrel, to return to pre-war levels of around US$70 per barrel.
However, Assoc. Prof. Ubilava stated that the sooner the war ends, the better the global economic outlook will be.
Australia’s Associated Press is the beating heart of Australian news. AAP is Australia’s only independent national news channel and has been providing accurate, reliable and fast-paced news content to the media industry, government and corporate sector for 85 years. We inform Australia.
