A long shadow has fallen across the price of ordinary life: the Treasurer tells us that the markets no longer expect oil to return to its pre-conflict level before 2030, a reminder that wars fought far away still find their way into the tank, the grocery bill, and the hope of a steady job. Australia, like nearly every economy, is learning how tightly the world's fortunes are bound together, as inflation climbs above the central bank's range and borrowing costs rise in step. Whether the nation bends or breaks under this pressure will depend on the coming inflation figures and the Reserve Bank's
Chalmers Warns Oil Prices Won't Normalise Until 2030 as Inflation and Rate Rises Bite
Oil not expected back to pre-war levels until 2030
Mark
Why does a 2030 date for oil matter so much?
Mimi
Because it reframes this as a long squeeze, not a spike. Chalmers is saying markets don't see pump prices easing for years, and the national average is already $2.42 a litre.
Luke
Worth noting that's a market expectation Chalmers is relaying, not a forecast he owns. Markets can be wrong about 2030.
Mark
How does fuel connect to the inflation figure?
Mimi
Inflation hit 4 per cent in the 12 months to August. The ABS pointed to world oil prices and the end of the government's fuel excise relief that month.
Luke
So part of that jump is a policy decision, not only global oil. The source doesn't say how much each contributed.
Mark
And interest rates?
Mimi
Four rises this year, cash rate at 4.6 per cent, a 15-year high. Hauser called the outlook materially worse, so November is live.
Luke
Live, not confirmed. Wilson says markets are betting on a hike, but the RBA hasn't decided anything.
Mark
What about Wilson's recession claim?
Mimi
He says economists put it at 50-50. Chalmers only spoke of softer growth and slightly higher unemployment.
Luke
That 50-50 figure is Wilson's characterisation and no economists are named. Treat it as a political claim until someone shows the numbers.
Il Polso
- Crude has stayed above $100 a barrel for most of six weeks, and petrol now sits near $2.42 a litre at the bowser.
- Inflation reached 4 per cent in the year to August, with prices jumping 14.8 per cent in that month alone.
- Unemployment unexpectedly climbed to 4.7 per cent in September, the worst reading since October 2021.
- Markets are betting on another rate rise in November, and economists put the odds of recession at roughly even.
- The Treasurer promises softer growth ahead, while the opposition accuses the government of spending its way into trouble.
A long shadow has fallen across the price of ordinary life: the Treasurer tells us that the markets no longer expect oil to return to its pre-conflict level before 2030, a reminder that wars fought far away still find their way into the tank, the grocery bill, and the hope of a steady job. Australia, like nearly every economy, is learning how tightly the world's fortunes are bound together, as inflation climbs above the central bank's range and borrowing costs rise in step. Whether the nation bends or breaks under this pressure will depend on the coming inflation figures and the Reserve Bank's decision in November.
At an economic forum on Friday, Treasurer Jim Chalmers offered Australians a warning that will not comfort anyone filling a tank: markets do not expect oil prices to return to pre-conflict levels until 2030. Crude has traded above $100 a barrel for most of six weeks, and drivers are already paying more than $2 a litre, with the national average at $2.42.
Chalmers argued that the wars in Ukraine and Iran have shown how fragile the global economy is, and that Australia cannot escape their effects. Higher fuel costs are feeding straight into inflation, which reached 4 per cent in the year to August. The Reserve Bank's deputy governor says the outlook is materially worse than expected, and markets now anticipate further rate rises across major economies. Australians have already absorbed four hikes this year, lifting the cash rate to 4.6 per cent, a 15-year high.
The jobs market is also straining. Unemployment unexpectedly rose to 4.7 per cent in September, the worst since 2021. Chalmers expects softer growth and slightly higher joblessness, while the opposition, through Tim Wilson, blames government spending and warns of a coin-toss chance of recession.
The next markers are close: September's inflation figures arrive next week, and the Reserve Bank's November decision will show whether the rate rises continue.
Standing before an economic forum on Friday, Treasurer Jim Chalmers delivered a message that will not please anyone filling a tank: markets do not expect oil prices to return to their pre-conflict levels until 2030.
Chalmers said the wars in Ukraine and Iran have exposed how fragile the global economy is. Australia, he said, is not immune from the consequences of two wars that touch almost every economy in some way, raising risks to global growth, pushing up inflation and lifting borrowing costs.
The oil numbers behind his warning are stark. Crude has traded above $100 a barrel for most of the past six weeks. At the bowser, Australian motorists are already paying more than $2 a litre, with the latest national average sitting at $2.42.
That is feeding directly into the broader price picture. Inflation reached 4 per cent in the 12 months to August, with costs rising 14.8 per cent in the month alone. Rachael McCririck, the Australian Bureau of Statistics head of price statistics, attributed the jump at the time to higher world oil prices and to the federal government unwinding the last of its fuel excise relief measures in August. September's inflation figures are due next week.
Chalmers noted that markets do not expect inflation to return to the Reserve Bank's 2 to 3 per cent target range any time soon. The consequence, he said, is that markets now anticipate multiple interest rate rises in every major advanced economy over the next 12 months. Australians have already absorbed four rate hikes this year, taking the cash rate to a 15-year high of 4.6 per cent. On Wednesday, Reserve Bank deputy governor Andrew Hauser said the inflation outlook is "materially worse" than previously projected, which has raised the prospect of another increase in November. The Reserve Bank and Treasury both expect inflation to remain outside the target range for the next 12 months.
The jobs market is showing strain too. Unemployment rose unexpectedly to 4.7 per cent in September, the worst result since October 2021, when the country was only just emerging from COVID-era lockdowns. Chalmers said the combination of high inflation and high interest rates will likely mean "softer growth and slightly higher unemployment" ahead of the Mid-Year Economic and Fiscal Outlook.
The opposition used the moment to press its case against the government. Shadow treasurer Tim Wilson again blamed federal spending for fuelling inflation. He said markets are betting on another rate rise in November and that economists are putting a 50-50 chance on recession. Of the Treasurer, he said: "Our Titanic Treasurer has been warned about the iceberg of taxes, spending and regulation, and his only response is to shout, 'full steam ahead'."
The next markers are close. September's inflation data arrives next week, and the Reserve Bank's November decision will show whether the rate rises continue.
Citazioni salienti
Markets now expect multiple interest rate rises in every major advanced economy over the next 12 months.— Treasurer Jim Chalmers
Markets are now betting on another rate rise in November, and economists are putting a 50-50 chance on recession.— Shadow treasurer Tim Wilson
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Economy & Finance