Businesses from the building sector to retail are likely to push up prices even further in the near term as the fallout from the war against Iran works its way through the country, the Reserve Bank’s chief economist has warned.
Sarah Hunter, speaking in Sydney this morning, said the surge in oil prices since the war began had been “particularly challenging to navigate” given it had pushed up inflation at a time when the Australian economy was already dealing with cost pressures.
“Given these starting conditions, our research suggests pass-through will be faster and more extensive, and the risk of inflation expectations drifting higher is elevated,” she said.
The bank has lifted official interest rates at its past three meetings, pushing it to 4.35 per cent. Financial markets put the chance of a further rate rise next month at just 22 per cent.
Hunter said the bank was already hearing from businesses about plans to lift their prices.
“Expectations for pass-through to consumer prices vary, but we are hearing from some
firms that they plan to increase their retail prices,” she said.
“For example, some construction firms – who have been relatively highly exposed to transport and oil-derived raw materials cost increases – are reviewing prices for new contracts.”
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