Australia braces for second-round inflation impacts

RBA governor Michele Bullock warned last week that the Middle East war is already creating second-round inflation effects in Australia — where higher oil prices spill over into broader price and wage-setting — and that these effects risk making inflation more persistent and harder to bring down.

Bullock said many businesses facing higher fuel and input costs are raising prices for goods and services, and this behaviour is spreading across the economy. She warned that:

“Many firms that are facing cost pressures are looking to increase prices… If left unchecked, higher costs get embedded into price and wage setting decisions”.