Australians should brace for the rising cost of fuel and food as Russia’s invasion of Ukraine causes shockwaves through the global economy, according to the federal government.
Treasurer Josh Frydenberg gave the warning in an interview with the Australian Financial Review yesterday, as global oil prices surpassed US$100 a barrel for the first time since 2014.
“Australia has little direct economic exposure to the Russian market, but we will be impacted by the headwinds that this will cause for the global economy,” Frydenberg says.
“Fuel and food prices will rise, flowing through to inflation.”
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The treasurer continued that, while some Australian exporters may benefit from the higher prices, “Australian consumers will not”.
It comes as consumer confidence has again declined despite the government’s hope of a swift economic recovery from COVID-19, according to ANZ-Roy Morgan.
Consumer confidence decreased 1.4 points to 101.8 during the third week of February, meaning it is now 7.4 points below the same week one year ago.
Fuel prices are already causing a major headache for Australian motorists, with record unleaded prices surging past $1.80 to reach highs of $2.00 in parts of the country.
Energy Minister Angus Taylor says Australia is prepared to join countries in the International Energy Agency in capping petrol prices by tapping into the oil reserves (Australia holds about two days’ worth of oil in the US Strategic Petroleum Reserve).
“While we cannot control these international price spikes, we are closely monitoring the situation with the IEA and the United States and stand ready to take action to help alleviate these pressures,” Taylor says.
“The situation between Russia and Ukraine has added to global oil price pressures, which are being experienced right around the world. We understand that as a result of this, many Australian families and businesses are feeling this at the pump when they go to fill up their vehicle.”
The inflated price of fuel was one of the major contributing factors to Australia’s biggest inflation rise since 2014, the Bureau of Statistics reported last month, along with the rising cost of building new homes.
With an unemployment rate falling to a 13 year low, many are turning their attention to the cash rate — but the Reserve Bank of Australia is holding off on making changes yet, with one eye on the country’s subdued wage growth.