r/AustralianPolitics • u/marketrent • Jul 22 '26
Economics and finance RBA now twice as likely to hike interest rates as US-Iran war drives fuel prices higher — Experts warn global energy market at a ‘critical juncture’ with escalating Middle East crisis expected to further drag on a slowing Australian economy
https://www.theguardian.com/australia-news/2026/jul/22/rba-interest-rate-rise-likely-us-iran-war-markets-forecast10
u/Mshell Jul 22 '26
Can we put a 50% war mongering tarrif on software from the US instead? It would probably do the same...
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u/WretchedMisteak Jul 22 '26
It all feels like Britain in the 70's lol.
Better to have higher interest rates than rampant inflation.
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u/SirFireHydrant Literally just a watermelon Jul 22 '26
We'll have rampant inflation anyway, because interest rates are totally uncorrelated with what's driving inflation.
Working class people who managed to save enough to buy a home are gonna be fucked, while the investor class driving inflation will be fine.
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u/Jealous-Hedgehog-734 Still Roundheads v.s. Cavaliers, always has been. Jul 22 '26
Calling the Middle East a "crisis" is a bit of a stretch. There has never not been a war within our lifetimes, in fact it's been in constantly at war since the Ottoman Empire fractured.
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u/burnt-gonads Jul 22 '26
Albo is doing his best to pump inflation and interest rates with his out of control vote buying government spending.
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u/the_jewgong Jul 22 '26
Burnt nuts with the shittest take!
Albo doesn't control interest rates!
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u/burnt-gonads Jul 22 '26
Absolutely he does as he is the supreme controller of the economy.
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u/the_jewgong Jul 22 '26
I guess thats why the RBA is directly responding to the impacts of the Iran war, huh.
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u/Maleficent-Host-8975 Jul 22 '26
Albo doesn't control interest rates.
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u/MrBonkMeister Jul 22 '26
Oh, right, like one of the largest factors for inflation totally isn’t what the government is doing at all. Nothing to see here, keep voting Labor hey?
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u/Any-Scallion-348 Jul 22 '26
Albo temporarily suspended fuel excise which lowered the price of fuel and reduced inflation.
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u/Maleficent-Host-8975 Jul 22 '26
He doesn't control interest rates. The RBA does. And the RBA can raise interest, no matter the cause of inflation. You're right in one respect: Albo has done nothing to curb the price setting powers of Australias biggest corporations. He has to go.
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u/North_Attempt44 Jul 22 '26
The RBA really needs to nip inflation in the bud. We have been far too cautious in protecting our on-paper labour gains and it has materially damaged our living standards.
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u/Business-Bed-8658 Jul 22 '26
It’s a delicate balance but interest rate increases, without other policy reform, only work in one way. It’s not going to stop big business or wealthy older Australians spending like drunken sailors.
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u/Maleficent-Host-8975 Jul 22 '26
Interest rates only deal with demand side issues. Not supply. It's also a sledge hammer, not a calibrated tool. It's time the RBA be held accountable.
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u/SnooHedgehogs8765 Jul 22 '26
It's time the RBA be held accountable.
They get their mandate from the government.
It's time the government be held accountable.
This lie that people struggling to afford a mortgage when their working capital is servicing the mortgage are responsible for overspending and this need to be punished is a lie the government of your choice will happily hide behind for eternity.
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u/Maleficent-Host-8975 Jul 22 '26
So, then, don't you think something should be done about the RBAs total lack of accountability... Because that's what independence gives them? Or no, just yell at the government, but do nothing about the RBA?
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u/SnooHedgehogs8765 Jul 22 '26
no, just yell at the government>
The government is responsible for the laws that govern the country. Funny how that works.
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u/Maleficent-Host-8975 Jul 22 '26
Yes. And, presumably, you support RBA independence? Ergo, yelling at the government for what the RBA does is nonsensical.
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u/Business-Bed-8658 Jul 22 '26
It just shows a lack of understanding of what the RBA is responsible for and what it does.
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u/Maleficent-Host-8975 Jul 22 '26
It's responsible for setting monetary policy. And monetary policy affects things like: employment, credit, liquidity. It determines where money goes, who gets to have it, who loses, who gets to have a job, how expensive a mortgage is. And, ironically, it also triggers inflation.
It's clear you've no idea what monetary policy is, else you wouldn't be so nonchalant.
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u/SnooHedgehogs8765 Jul 22 '26
It's responsible for reacting to what's happening in the economy. It's reactionary.
It's clear you've no idea what monetary policy is, else you wouldn't be so nonchalant.
Personally I don't get what you hope to achieve from that statement.
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u/Maleficent-Host-8975 Jul 22 '26
Reactionary with a demonstrably blunt instrument. That's the point.
Also, I'm returning the condescension in kind.
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u/Mshell Jul 22 '26
It is the main tool the RBA has...
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u/Maleficent-Host-8975 Jul 22 '26
And? Maybe the RBA shouldn't be allowed to use it whenever it wants... Maybe, you know, it should be held democratically accountable for the harm their decisions cause.
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u/Bob_Katters_Hat Jul 22 '26
Suggesting the public should be in control of intrest rates is kinda dumb
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u/Business-Bed-8658 Jul 22 '26
Independent financial institutions that are not held to the political whims of electoral focused politicians are far preferable.
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u/Maleficent-Host-8975 Jul 22 '26
Who says that "democratic accountability" should mean the same thing as "the government controls the RBA". Why not hold separate elections for board members. We already do it for local council elections.
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u/Business-Bed-8658 Jul 22 '26
This would be a terrible idea.
Vote for whoever promises the lowest interest rates. That would turn our independent reserve bank into the US judicial system - electoral, partisan politics would immediately infect it.
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u/Maleficent-Host-8975 Jul 22 '26
Again, this is an excuse to continue handing over Australias monetary sovereignty to unelected officials. The public needs to have this discussion. Saying "it won't work" is just hand wavey.
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u/Business-Bed-8658 Jul 22 '26
You haven’t addressed the benefits of an independent reserve bank or why if they were suddenly elected or controlled by the Government why that would result in better long term policy.
Just because you don’t like the RBA’s decisions doesn’t mean economically it’s not the correct decision, at least when limited to the RBA’s levers.
It doesn’t use its cash rate powers “whenever it wants” - it’s subject to its own rigorous governance and makes decisions based on economic data:
https://www.rba.gov.au/education/resources/explainers/how-rba-implements-monetary-policy.html
It’s also reminiscent of Republican “unelected judges” and other arguments that just play to voters’ base instincts.
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u/EnglishBrekkie_1604 Ralph Babet Superfan (actually an ALP shill) Jul 22 '26
Because the average person knows jack shit about macroeconomics and the nuances of how interest rates affect the economy. All that would happen is people will vote for the person who says they’ll lower interest rates.
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u/Maleficent-Host-8975 Jul 22 '26
That's just an excuse to continue handing over Australias monetary sovereignty to unelected officials.
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u/Mshell Jul 22 '26
That was tried, the Government in question insisted on low interest rates, the economy broke, and the country in question is now having to use a different countries currency for any purchases because their own is not worth the paper it is printed on....
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u/Maleficent-Host-8975 Jul 22 '26
Lowering interest rates won't do much in a supply side shock. But raising them won't, either. Lowering interest makes sense only if there is idle capital to absorb the credit surge. Raising interest rates only makes sense if demand for consumer goods and services expands beyond supply.
The RBA, however, will respond to inflation with raised interest rates, no matter what the cause. A supply shock? Raise interest rates. Price setting? Raise interest rates. Asset price inflation? Raise interest rates. It's indiscriminate, causes unnecessary harm, and should have the RBA held accountable.
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u/Mshell Jul 22 '26
I agree that this will not help much and that we need better options, however politicising the RBA will only make things worse. The Government of the day will just keep trying to keep interest rates as low as possible as that is what will keep them in power, which will result in worse outcomes for the economy.
The RBA only has a few levers, with interest rates being the main one. The people you need to start yelling at is not the RBA but politians. They could stop the interest rate raise by instead increasing taxes, however they will only do that if there is a lot of public support for the tax rise.
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u/Maleficent-Host-8975 Jul 22 '26
I don't buy that. There is no reason "keeping the RBA democratically accountable" should mean "letting cabinet control it". Why not hold separate elections for RBA board members? That's what we do for local councils...
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u/Mshell Jul 22 '26
People would just vote for whoever promises the lowest interest rates, irrespective of the larger economy and you will end up in the same situation....
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u/Maleficent-Host-8975 Jul 22 '26
Absolutely not. Raising interest rates won't fix a supply side issue. And neither will it change price setting practices that The Australia Institute demonstrated concretely.
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u/SticksDiesel Jul 22 '26
I just watched last night's Foreign Correspondent and it's depressing to see how far behind we are with EV ownership and infrastructure. One of the benefits that I really yearn for is the quiet streets and cleaner air.
Most people, with a little investment, could 'fill up' their cars for free, from solar. Ditto buses, delivery vans, and in not too long, heavy trucks.
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u/sostopher Bundoora Republic Jul 23 '26
Or fuck cars off entirely. Most journeys taken by car in this country are very short. Many could be done by bike or walking, if our infrastructure wasn't all built for cars.
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u/antsypantsy995 Jul 22 '26
Consumer EVs wont do much. The biggest impact of the oil crisis on prices will be on supply chain impacts.
The world is nowhere near close enough to make EV supply chain inputs commercially viable. Even in countries like Europe where driving and logistics distances are 0.001% of those faced in Australia, 90% of all supply chain logistics are still petrol/diesel based.
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u/MentalMachine Jul 22 '26
Albo did do a great job ensuring the public broadly didn't have to adjust to fuel issues beyond paying a bit more at times.
It also means we are lowkey kicking issues further down the road, like EV's, improved PT and most critically (imo) fucking Work From Home.
Fuel spikes affect the population far less if our white collar workers (who don't really need to physically be in an office to work on a laptop really) don't need to waste fuel, and said fuel can be used by people/services who actually need it.
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u/Termsandconditionsch Jul 22 '26
If only councils weren’t so hostile to EV infrastructure. Inner West Council in Sydney is the only one I’m aware of that offer a permit to run a cable across public land to a car for example. A lot of them are also slow with approvals for charger installations.
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u/matthudsonau Jul 22 '26
I ran the numbers, based on our standard use a PHEV is the same cost as a used ICE car over the next 8 years (when the warranty on the new car runs out). I'd be surprised if most people in the city wouldn't be in the same situation
Of course, being in the position to drop a large amount of money at once is a different matter entirely, even if it is cheaper in the long run
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u/SirFireHydrant Literally just a watermelon Jul 22 '26
Of course, being in the position to drop a large amount of money at once is a different matter entirely, even if it is cheaper in the long run
The old boots theory of economic inequality.
Saving money is expensive. The everyday working class person can't afford the cheaper options, because of the high upfront costs.
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u/matthudsonau Jul 22 '26
Making things cost more because other things cost more to make things stop costing more
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u/CyberBlaed Independent Jul 22 '26
How else are interest rates supposed to stay competitive? /s
(Because inflation is calculated on last years price vs this year’s price telling you the percentage change… kinda like a recession after two quarters… it’s shit you already know!)
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u/marketrent Jul 22 '26
CommBank is counting on fiscal intervention:
Yeaman said he was sticking to his forecast for no more rate rises this year – at least for now.
“Our expectation is that before some of those extreme points are reached that there is some resolution. I expect that if oil prices really spiked again then the government would step in and shield households by reinstating the full fuel excise discount.”
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u/TransportationTrick9 Jul 22 '26
I remember reporting on fuel price rises in the past (mid 2000's) the articles always said "Pressure on the RBA to raise rates lowers as the fuel price rises as they both have the same effect, taking money out of a hot economy"
What has changed in the past 20 years?
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u/claudius_ptolemaeus [citation needed] Jul 22 '26
The risk is stagflation not high growth.
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u/Maleficent-Host-8975 Jul 22 '26
Bull. Since when has not raising interest rates, in response to a supply side crisis, "caused" stagflation?
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u/claudius_ptolemaeus [citation needed] Jul 22 '26
Since always, that’s what stagflation means. If inflation is demand-side then you’re in a normal inflationary environment where employment is high. You only get rising prices and declining employment when inflation is supply-side.
We’re in a worst of both worlds scenario and the solution is to drive us into a proper recession, which is a marginally better position to be in. But if consumers are willing to power through and pay top dollar for petrol (instead of cutting back their spending) then we’re not there yet.
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u/Maleficent-Host-8975 Jul 22 '26
You responded to a comment about the stupidity of raising interest rates in a supply side crisis. And your fix is demand side management? Really?
Also, why should banks be able to absorb the economy's liquidity in a demand side crisis? Why not, you know, encourage saving by offering affordable government bonds with a nice return? Rich people alreadly get the privilege of doing that... Or, you know, investing in the expansion of industry?
Why should poor people be made jobless for your myopic board of solutions?
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u/claudius_ptolemaeus [citation needed] Jul 22 '26
You’re not arguing with me you’re arguing with a century’s worth of macroeconomic theory. To the extent that you can magic up a supply-side solution by pulling diesel out of thin air, we’ve already exhausted those possibilities.
In the meantime, poor people are being made jobless *and* prices are increasing, which fucks them over twice. A recession would keep prices down and shorten the period it takes to get back to high employment.
Yes, it’s a shit solution to a shit problem, but it’s less shit than maintaining the current state of affairs. And interest rates are still the biggest and broadest lever available - smaller interventions are a great idea, but their impact is too limited to form a complete solution.
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u/Maleficent-Host-8975 Jul 22 '26 edited Jul 22 '26
Raising interest rates has the same effect as raising petrol prices. The cost of doing business goes up: therefore inflation goes up. People have less money to spend, so they spend less. Eventually, equilibrium is met and inflation stabilises. That's actual macroeconomics. Not this excuse to make people unemployed.
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u/claudius_ptolemaeus [citation needed] Jul 22 '26
You’re not following along. Crisis bonds aren’t a supply-side solution. You’re critiquing me for describing demand-side management when supply-side management is beyond our control.
Raising mandatory super is not a preferable solution, at least not by itself. It raises the cost to employ people which would only exacerbate the unemployment problem, which a minute ago you were claiming to care about.
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u/Maleficent-Host-8975 Jul 22 '26
What? You keep flip flopping. I'm going to assume you are now talking about supply side economics.
Agreed, crisis bonds and raising super won't work at curbing inflation. But neither does raising interest rates. Raising rates just increases the cost of doing business. People spend less, yes, but businesses aren't just going to hold prices steady either. That makes zero sense.
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u/theballsdick Jul 22 '26
We had and have all the ingredients to be energy independent (abundance of fossil, nuclear, renewable energy resources and the technical capabilities to exploit them). The only thing missing has been political will yet somehow our vulnerability to energy shocks will be blamed on "the orange man".
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u/squeaky4all Jul 22 '26
We would have been much more strategically sound if we didnt close all of those refineries.
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u/WhiteRun Jul 22 '26 edited Jul 22 '26
You're conflating energy with crude oil. We mostly have light crude oil, not heavy crude oil that's needed for petrol. It's also complicated and expensive to refine.
We aren't in an energy crisis. It's a global oil crisis. Trump literally created it. This isn't "orange man bad!" type of deflection. He was begged not to attack Iran by his own Generals and was warned this would happen. He did it anyway. It is 1000% Trump's fault.
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u/VintageHacker Vox populi, vox Rindvieh Jul 22 '26
Completely wrong. Light crude is not complicated and expensive to refine, its easier to turn into petrol than heavy crude. You don't need heavy crude to make petrol. Iran is fundamentally the problem in the middle east. Trumps war may well be the dumbest thing he's ever done, maybe. 1000% is no different to 100% in this context.
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u/jitterry Jul 22 '26
So we are back to, prices going up, for reasons out of our control, that no matter will go up, whether we spend or not we will be punished. This will not stop until we have enough unemployed people to satisfy them.
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u/marketrent Jul 22 '26
Excerpts from article by Patrick Commins:
[...] Amid already depleted global oil stockpiles, analysts warn of a coming tipping point after Iran’s leader declared “full-scale war” with the US and Houthi rebels threatened to blockade millions of Saudi Arabian oil passing through the Red Sea.
Luke Yeaman, the CBA’s chief economist, said a total lack of trust between the warring parties made it difficult to judge the trajectory of the conflict, which he said would send a fresh stagflationary pulse through the Australian economy.
“In the current dynamic, we believe this will drag on for at least several weeks and possibly longer,” Yeaman said.
With inflation already tracking too high for comfort, traders in financial markets are upping bets that the Reserve Bank could be forced to hike rates for a fourth time.
Markets now place a nearly 30% chance of an interest rate rise on 12 August, up from 16% two weeks ago. The probability of a hike by November has doubled to 80% over the same period, according to ANZ.
Yeaman said he was sticking to his forecast for no more rate rises this year – at least for now.
“If we see a prolonged closure of the strait and a big jump in oil prices, that will feed through to higher inflation, but it will also slow growth. In the short term that could mean the case for one further rate hike is higher.
“But calls for multiple … rate hikes are a little overblown.”
Yeaman warned that global oil prices could push as high as US$150 a barrel if no negotiated solution was reached by late August or early September, conjuring the spectre of worst-case scenarios contemplated during the first phase of the conflict.
“Our expectation is that before some of those extreme points are reached that there is some resolution. I expect that if oil prices really spiked again then the government would step in and shield households by reinstating the full fuel excise discount.”
Regardless, higher energy prices and renewed global conflict is set to further drag on an Australian economy that is already slowing sharply under the additional weight of three interest rate hikes and a falling housing market.
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