6 ways war in the Middle East could cook our economy (and 2 ways it won’t)
Drivers have already seen prices rise at the pump, but it could only be the beginning.
The ongoing conflict in the Middle East is only in its second week and it's already having an impact on our economy.
Fuel prices have started rising already, but they're expected to rise even further.
The rising cost of fuel doesn't only impact your spend at the pump, it has other implications. Let's dive into them.
6 ways the Middle East war will wreak havoc on our money
Fuel
As we've already seen, fuel prices are rising. That's thanks to the Middle East being our primary resource for fuel. We have stockpiles of fuel onshore, but only enough for a few weeks. This will not only have an impact on car fuel, but also jet fuel.
Inflation
As we (regular people but also big companies and the government) will have to pay more for all of the things in this list, it's likely to drive inflation up. The RBA was already concerned that energy prices were going to keep inflation higher, but we're looking at even higher prices for everything.
And yes, this would unfortunately lead to higher home loan rates.
Hospitality
It's not just fuel that we'll struggle to get hold of. Farmers are worried about access to crucial fertilisers, which are used to grow crops. Some of the biggest at-risk products are coffee and wheat (the humble beer and a burger pub deal could be about to get considerably more expensive).
Groceries
With impacts to energy costs, farming and fuel, our everyday grocery prices could start rising too.
Shopping
If you're ordering from overseas or from Australian businesses who supply from overseas, you'll likely find those costs rising too. Not only are fuel costs making transportation expensive, but there are fewer transit routes right now with certain air spaces, waterways and seas closed. This will make supply difficult, but also costly as there's more demand - not to mention higher insurance costs they're having to pay.
Energy
With a lot of our resourcing coming from the Middle East, we're going to have to pay more to get it here and that cost will be passed on to consumers.
Take a look at your energy provider to see if you can get on the front foot by switching now.
2 ways the economy might not be so bad
Better savings
For any money that you do save, if interest rates go up you'll get a better rate of return!
Supporting local
Australia has some fantastic local businesses which don't rely on imports and so may not be so impacted by the crisis in the Middle East. In fact, this may hugely benefit the Australian economy, with more money going towards Australian suppliers and business owners, as we avoid the businesses hiking costs because they buy from overseas.
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