RBA Warns Iran War Could Trigger 1980s-Style Stagflation in Australia

What Happens Next

• →Australian LNG and energy export revenues rise in nominal terms, but imported refined fuel costs spike disproportionately, widening the current account deficit as Australia remains a net importer of refined petroleum products.
• →The RBA faces a policy dilemma: raising rates to contain imported inflation risks tipping the housing market — already stretched at record household debt-to-income ratios — into correction, amplifying wealth-effect drag on consumption.
• →Budget compression forces the Chalmers Treasury to defer or scale back planned infrastructure and defense spending commitments, particularly AUKUS-adjacent procurement timelines that depend on sustained fiscal headroom.
• →Stagflation expectations become embedded in wage negotiation cycles, with unions in mining, transport, and public sectors pushing for inflation-indexed pay deals, creating a wage-price feedback loop that outlasts the initial oil shock.

Near-term: Global oil benchmarks push above USD 110/barrel within 1-3 months, driving Australian petrol prices toward AUD 2.50/litre and forcing the RBA to hold or raise the cash rate despite weakening domestic demand signals. Long-term: Over 2-5 years, persistent cost-push inflation and elevated rates restructure Australia's housing market and consumer economy, accelerating the shift toward energy self-sufficiency investment (renewables, refining capacity) while reducing reliance on Middle Eastern supply chains.