Oil chaos is set to unleash a wave of inflation across Australia, according to top economist Diana Mousina, who predicts a challenging six-month period ahead for consumers. The recent US-Israeli attacks on Iran and Iran's response by closing the Strait of Hormuz have triggered unprecedented global oil price shocks, with consumers ultimately bearing the brunt of these price hikes. Mousina's analysis for AMP's Econosights highlights the dire financial consequences for Australian households, with a weekly petrol expenditure of $60 set to skyrocket to $88 by March and potentially dip to $78 in April, assuming no further oil price increases. This prolonged oil shock is expected to have a ripple effect, dampening consumer spending and GDP growth, and prompting the Reserve Bank of Australia to raise interest rates, a response reminiscent of the COVID-19 pandemic. Mousina warns of a high risk of market drawdowns of 5 to 10 percent, emphasizing the nervousness of central banks in treating the current supply shock as a transitory issue. The economist predicts another interest rate hike in May and a potential increase later in 2026, followed by a high chance of rate cuts in 2027 as GDP growth slows. This complex scenario underscores the delicate balance between inflation, interest rates, and economic stability, leaving Australians bracing for a turbulent period ahead.
