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The latest forecast indicates that interest rates are set to rise by two more increments than initially anticipated. Currently, the rates have climbed from 3.60 percent at the close of 2025 to 4.15 percent. With three additional hikes, projections suggest they could reach 4.85 percent by August, a level unseen since the latter part of 2008.
This adjustment is attributed to extended disruptions in fuel supply, compounded by a sluggish recovery. The Strait of Hormuz, a critical artery for global fuel transport, is expected to remain largely inaccessible for eight weeks, with traffic only gradually returning to normal thereafter, she explained.
Furthermore, the rapid transmission of heightened fuel and oil-derived product costs into other price sectors in Australia has been unexpectedly swift, impacting the broader economic landscape.
While the fuel excise is anticipated to alleviate some immediate pressure on headline inflation, it is still expected to climb, peaking at around 5.4 percent, according to her analysis.
“It also reflects the surprisingly rapid pass-through of higher fuel and other oil-derived product prices into other prices in Australia.
She said the fuel excise would reduce the short-term outlook for headline inflation, but she still said it was likely to peak at 5.4 per cent.
“The (fuel excise) announcement also does not affect prices of other oil-related products, including aviation fuel and various plastics, or any price increases from damage to gas and other production facilities in non-combatant Gulf states,” Ellis said.
She also said the cash rate rising could lead to higher unemployment, up to five per cent, and that Australia’s economic growth would most likely slow.
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