If turbocharged petrol prices are driving up inflation, then why are Australia’s unemployed on the line? | Greg Jericho
Source: Guardian Econ ↗
The Reserve Bank of Australia (RBA) raised the cash rate to 4.6% and signalled further hikes, prompting concerns that a recession may be needed to bring inflation down to the 2‑3% target range. Governor Michele Bullock defended the move by emphasizing that the RBA’s primary mandate is price stability, effectively defining “full employment” in terms of low and stable inflation rather than the unemployment rate itself. After the July meeting, market expectations shifted from anticipating no further rate rises to pricing in a climb to 4.85% by March next year, despite the fact that without the recent surge in petrol prices—driven by the war in Iran—core inflation would have slipped in August.
Bullock explained that the current unemployment level is “a bit tight” and not consistent with the low‑inflation goal, but she cautioned that rising unemployment does not necessarily mean massive job losses, merely longer job‑search periods. She warned that if inflation expectations become anchored at 3‑4%, the RBA might be forced into a “dramatic slowdown” of the economy to prevent expectations from drifting higher. This reflects a willingness to accept higher unemployment as a trade‑off for anchoring inflation expectations, even though the RBA’s dual mandate formally includes maintaining full employment.
The commentary highlights the broader context: petrol prices have surged due to geopolitical tensions, inflating headline inflation to 4.0% while core inflation remains at 3.6%; meanwhile, corporate profits at Ampol have exploded, and household spending fell once the fuel price effect is stripped out. Historical references to past recessions suggest that job losses can be deep and recovery slow, especially for men in full‑time work. Bullock’s remarks imply that avoiding a “massive increase” in unemployment is important but not a deal‑breaker, leaving the possibility that the RBA could tolerate a recession if it believes doing so is necessary to lower inflation expectations and achieve the 2.5% midpoint of its target band.
⚡ Effects Interpreter
🌍World Economylow impact
What this means for you
- ▶Economists will chew this over, and growth forecasts might be nudged.
- ▶Forecasters often revise their outlook when data like this lands.
🏙️Local Economylow impact
What this means for you
- ▶Everyday costs tend to catch up with economic news a few weeks late.
- ▶Household bills may drift in step with the bigger economic picture.
🏦Rates & Banksmedium impact
What this means for you
- ▶Savings rates can lag behind this kind of news by weeks, not days.
- ▶Watching how currency markets react can hint at where rates head next.
❤️Healthmedium impact
What this means for you
- ▶Taking a break from the headlines can do more good than scrolling on.
- ▶News like this can nibble at everyday calm more than people expect.
💷Wealthmedium impact
What this means for you
- ▶Long-term savers usually ride out these small bumps just fine.
- ▶Savers with a clear plan tend to feel less rattled by news like this.
🏠Housinglow impact
What this means for you
- ▶Mortgage deals might edge around if lenders read the wider mood.
- ▶First-time buyers watching the market closely might see little change in the short term.
🌍 Effects for your country
The U.S.'s central bank rate currently stands at 3.75%, so a global rates move like this could feed through to local borrowing costs. The U.S.'s economy is growing at 2.3% with inflation at 3.2%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track the U.S.'s own central bank rate closely. With the U.S.'s unemployment at 4.4%, personal-finance effects like this land on a labour market that is currently fairly stable. Health-system effects are harder to localise from economic indicators alone — the real impact in the U.S. depends more on local healthcare capacity than the figures above.
The UK's central bank rate currently stands at 3.75%, so a global rates move like this could feed through to local borrowing costs. The UK's economy is growing at 0.8% with inflation at 3.2%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track the UK's own central bank rate closely. With the UK's unemployment at 5.6%, personal-finance effects like this land on a labour market that is currently fairly stable. Health-system effects are harder to localise from economic indicators alone — the real impact in the UK depends more on local healthcare capacity than the figures above.
France's central bank rate currently stands at 2%, so a global rates move like this could feed through to local borrowing costs. France's economy is growing at 0.9% with inflation at 1.8%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track France's own central bank rate closely. With France's unemployment at 7.9%, personal-finance effects like this land on a labour market that is already under strain. Health-system effects are harder to localise from economic indicators alone — the real impact in France depends more on local healthcare capacity than the figures above.
Romania's central bank rate currently stands at 6.5%, so a global rates move like this could feed through to local borrowing costs. Romania's economy is growing at 0.7% with inflation at 7.8%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track Romania's own central bank rate closely. With Romania's unemployment at 6%, personal-finance effects like this land on a labour market that is currently fairly stable. Health-system effects are harder to localise from economic indicators alone — the real impact in Romania depends more on local healthcare capacity than the figures above.
The UAE's central bank rate currently stands at 3.65%, so a global rates move like this could feed through to local borrowing costs. The UAE's economy is growing at 3.1% with inflation at 2.5%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track the UAE's own central bank rate closely. Health-system effects are harder to localise from economic indicators alone — the real impact in the UAE depends more on local healthcare capacity than the figures above.