Australians are likely to face another surge in petrol prices, adding to the financial strain at the pump for many households already stretched thin.
Although Australia’s robust job market remains a reliable beacon of economic strength, with the creation of over 76,000 jobs in June, potential economic challenges loom on the horizon.
Following the release of a positive labour force report from the Australian Bureau of Statistics, bond traders have amplified their predictions that the Reserve Bank of Australia will implement another interest rate hike, marking the fourth of its kind in 2026.
Expectations are now firmly set for a rate increase by Christmas, a considerable shift from just a few weeks ago when opinions were evenly divided.
This renewed anxiety over interest rates isn’t entirely driven by domestic issues alone.
Renewed hostilities in the Middle East have sent oil prices rising again and threaten to add fresh inflationary pressures to the economy.
While June quarter inflation data next week will be crucial to the RBA’s next rates decision in August, the figures could already be dated by the time they are released.
Brent crude oil prices have risen from $US72 ($103) a barrel to more than $US96 ($138) a barrel in recent weeks.
As a rule of thumb, each dollar higher the benchmark oil price results in about a cent per litre increase in petrol prices at the bowser.
Along with an extra 16c a litre added to fuel prices from 2 August because of the full resumption of the federal excise, commuters could soon be looking at petrol prices above $2 a litre once more.
Are higher prices here to stay?
Australians might have to become accustomed to higher fuel prices sticking around, said economists at National Australia Bank.
“Recent developments in the Middle East show that the cost shock looks set to be less of a one-off spike and instead something that proves more grinding and protracted,” they said in a research note.
Although jobs growth has remained robust, at 4.4 per cent the unemployment rate is higher than the RBA’s June quarter forecast of 4.2 per cent, implying that the labour market is weaker than had been expected.
While higher oil prices risk pushing inflation higher, they also pose risks for growth, said Commonwealth Bank head of Australian economics Belinda Allen.
Victoria’s economy is leading the way down, where the state’s unemployment rate climbed to 5.1 per cent.
“That’s a warning sign that both the Allan and Albanese governments are failing to create the economic conditions businesses need to invest, grow and create jobs,” said federal opposition employment spokesperson Jane Hume.