Australia's Tough Economic Road Ahead

0:00From Sydney, this is your March 12 update. Australia faces a tough economic road ahead as the war in the Middle East between Israel, the United States, and Iran drives oil prices skyward. Economist warned that prices could hit $150-$200 a barrel, fueling inflation not seen in years. This comes after the Reserve Bank of Australia struggled to keep inflation in its 2-3% target for the past decade. Expectations are building for the bank to raise interest rates next week, pushing the cash rate to 4.1%, followed by another hike to 4.35% in May. This would mark the first back-to-back-to-back increases since the pandemic ended. Deputy Governor Andrew Hauser highlighted how the conflict adds huge uncertainty, making it harder to tame prices. Households are already feeling the pinch, with spending dropping 0.5% in February, the first decline since September of last year. Outlay spell on utilities, hospitality, household goods, and new cars. Officials note weaker consumer activity than

1:04expected, raising fears that rapid rate hikes could slow growth too much and boost unemployment. New forecasts paint a grim picture for oil. Even if the war ends soon, experts at Wood McKenzie say prices may need to reach $150-$150 a barrel to balance supply and demand. That could add 50 cents a liter to petrol in Sydney and Melbourne. Commodity analysts predict the crisis lasting months, with prices swinging wildly between $77 and $119 recently. Economists are split on the bank's next moves. Some, like independent expert Nikki Huttley, urged caution to avoid hurting the economy amid weak wages and spending. Others, including those at AMP, argue hikes are needed since business investment remained strong and consumers coped at 4.35%. Before, the bank now sees inflation topping 4.2% mid-year. Quick thanks to today's sponsor, see the description for more. A pillow that plays your podcasts, music, or white noise privately. No earbuds required. S-O-L-L-I-SOLY-PILLOW.COM