Treasurer Jim Chalmers has warned that Australia's inflation rate is expected to rise to between 4.5% and 4.8%, driven by the ongoing conflict in the Middle East. Speaking on Sky News, Chalmers said Treasury modelling indicates inflation could peak in the "mid to high fours," up from the current 3.8%. This comes as economists predict the Reserve Bank of Australia (RBA) will raise interest rates this week and again in May, just days before the federal budget is unveiled.
Chalmers dismissed fears of a recession, stating that while the conflict will hit economic growth, it is not expected to cause two consecutive quarters of negative growth. "There are a lot of unknowns and volatility," he said, but the government does not anticipate a shrinking economy. The RBA board meets this week to consider the cash rate, with major banks tipping an increase, followed by another in May.
The Greens leader, Larissa Waters, has called on the RBA not to raise rates, arguing that the inflation pressure is a supply-side issue caused by the war, which rate hikes cannot address. "People are already struggling with price gouging at the petrol pump and the supermarket," she said. Chalmers, however, confirmed that the economic shock would not derail reform priorities for the fifth federal budget, including a potential reduction to the capital gains tax discount.
On fuel supplies, Chalmers assured that Australia has more than enough supply despite disruptions in the Strait of Hormuz. However, One Nation MP Barnaby Joyce has called for Australia to send a navy ship to the Middle East to protect fuel supplies, a move supported by fuel transport companies but opposed by the NRMA. NRMA spokesman Peter Khoury urged Australians not to panic buy, warning that stockpiling could lead to shortages. "If that behaviour stops, it will go a long way to stabilising the situation," he said.
