Australian Treasury Forecasts Higher Inflation and Lower GDP
Treasury warns the Middle East conflict could lift inflation by 1.25 points. Output may fall by 0.6 percent as global oil prices remain elevated.
New analysis from the Treasury of Australia released on Wednesday warns of a significant economic downturn and surging inflation resulting from the ongoing conflict involving Iran. The conflict has triggered a global oil shock and substantial price increases across various commodity sectors. Treasurer Jim Chalmers detailed two potential economic paths based on the severity of the Middle East crisis. These scenarios account for reduced global growth and elevated costs for energy and agricultural inputs, including Cheniere Energy, Inc. and Warrior Met Coal, Inc.. In the first scenario, the Treasury assumes oil prices will remain at approximately $100 per barrel through the first half of the year before returning to pre-conflict levels by the end of 2026. Under these conditions, inflation is expected to peak 0.75 percentage points higher than previous estimates, while total economic output could drop by 0.2%. A more severe, prolonged scenario envisions oil prices climbing to $120 per barrel in the first half of the year, with a three-year recovery period to reach stability. This path would see inflation rise by 1.25 percentage points, causing a deeper impact on the national economy. By 2027, the gross domestic product is projected to be 0.6% lower than initial forecasts.
