Federal Treasurer Jim Chalmers has warned that the Middle East conflict will result in higher inflation for longer, as the global price of oil soars. The rate of inflation might hit five per cent by the middle of the year, according to Treasury modelling, which is way above the RBA’s preferred target range of two to three per cent.

Chalmers said the two key considerations were the timing of the end of the war, and how long it takes for the global economy to get back on track when that happens.

The consensus view among economists is that the RBA will lift the cash rate again in May, and then possibly one more time this year.

Inflation figures released yesterday by the ABS show that the annual pace in February, ahead of the outbreak in hostilities and surge in the price of oil, was 3.3 per cent in underlying terms. The headline rate was 3.7 per cent.

Listen to today's episode 🎧 

News in brief

Donald Trump said that Iran had given the US “a very big present, worth a tremendous amount of money” and that had convinced the President that the US is dealing with the “right people” in Iran. The comments came after reports that the US had sent Iran a 15-point plan to end the war, via intermediaries in Pakistan.

News of a potential peace plan in the Middle East sent the S&P/ASX 200 up 1.85 per cent to 8534 points yesterday, the best single session in a year. There were some very big moves among gold stocks and critical minerals companies. Worst, not surprisingly, were the energy companies which fell on the back of oil prices dropping back below $US100 a barrel. The rise added about $55 billion to the value of the bourse. 

Rio Tinto will receive $2 billion in taxpayer subsidies to secure the long-term future of its massive Boyne aluminium smelter in north Queensland, on the condition that it backs more than $7 billion worth of new clean energy projects in the state.

Tickets went on sale yesterday for the first commercial flights out of Western Sydney Airport, with Singapore Airlines the first to commit to the new hub.

Tesla’s “semitruck”, an electric semi-trailer, is receiving high praise from drivers after a one-month pilot. While the first Tesla truck was produced at the end of 2022, this year the company has pushed the product. Cameras around all parts of the truck, 500-mile (800km) range, and fast charging are winning over drivers, according to a report in the WSJ.

Fear-o-meter

CreditorWatch Chief Economist Ivan Colhoun says the duration of the conflict and extent of oil price rises are the two key factors impacting Australian businesses.

“A sustained oil price of over US$125-150 per barrel (sustained equals more than three to six months), will seriously pressure consumers’ budgets and business’s costs, and substantially increase the probability of recession.

The RBA’s February interest rate rise adds to that pressure, though I would expect the Bank’s Board to not raise interest rates again in May, while it seeks to understand the longevity and impacts on the economy from current oil prices.

The implications for businesses are quite clear. As long as oil prices remain very elevated, there will be increased pressures on many businesses and unfortunately the likelihood is of an increase in insolvencies.

There is also the risk that fuel supplies are significantly disrupted throughout the economy, causing a COVID-like shutdown event. The best development would be a very swift end to the conflict and quick reopening of the Strait of Hormuz.”

Fear & Greed Q+A today

On living better, disrupting healthcare, and how TMRW is using technology as a tool for preventative health:

 

"Almost half of Australians — about 44% — in the last year have gone onto AI, put in their confidential data into public models in the US, and asked for medical advice. Two-thirds of parents are seeking medical advice this way. And what that tells you is people are looking for something better — they’re trying to get access to information, they’re overwhelmed with the amount of data, and they want support through that process.

What’s now happening is you’ve effectively got what you could think of as a shadow AI doctor. That’s actually not a good thing, because these models will hallucinate — they’ll make things up — and they will pretend to diagnose you. In Australia, we have a regulatory regime where AI should not be diagnosing people. So what people are telling us is they want something better — a modern healthcare system that embraces technology, helps them understand their data, but still operates under proper supervision of a doctor.”

Greed-o-meter

Millennials are shopping online more than any other generation. But nearly every group is feeling the cost-of-living squeeze, according to Australia Post's eCommerce Report 2026.

Source: Australia Post

Forwarded from a friend? Sign up to our daily newsletter