RBA Assistant Governor flags rapid pass-through of $110 oil prices into consumer costs due to domestic capacity constraints and cost pressures.
The Reserve Bank of Australia warned that surging oil prices could accelerate inflation as businesses pass on higher energy costs more quickly than in past cycles. Brent crude trading above $110 a barrel, driven by Middle East tensions, poses a near-term risk to consumer prices amid already elevated domestic cost pressures.
The RBA raised rates to 4.35% this month, fully reversing 2025’s easing, citing persistent inflation risks. Research suggests oil price pass-through will be faster and more extensive this time, with firms already hiking fuel surcharges and reviewing contract prices.
While forecasts assume a swift resolution to the Gulf conflict, the RBA flagged risks of prolonged disruption. A broader shock could further lift inflation expectations, though weaker household consumption and business investment remain a downside scenario.