Australia’s inflation and RBA rate hikes amid Iran war oil price shock
Consensus Summary
Australia’s inflation remains stubbornly above the Reserve Bank’s 2-3% target, with February 2026 data showing 3.7% annual growth and underlying inflation steady at 3.3%. The RBA raised interest rates in March amid concerns over persistent price pressures, though markets anticipate further hikes—potentially pushing the cash rate to 4.6% or higher by year-end. The escalation of the Iran war on February 28 has exacerbated fears, as petrol prices surged by over 29% since the conflict began, with Brent crude prices hitting $US103. Economists warn March’s inflation data, released April 24, could reflect a spike to 5% or more, far exceeding the RBA’s earlier forecast of 4.2% for mid-2026. The conflict threatens to prolong inflationary pressures, complicating the RBA’s balancing act between curbing price growth and avoiding a recession. While February’s data showed cooling in some areas like automotive fuel, housing and food costs remained elevated, and wage growth has slowed, undermining claims that labor markets are driving inflation. The government has ruled out easing fuel excise taxes despite rising prices, leaving consumers and businesses to bear the brunt of both higher costs and tighter monetary policy. Treasurer Jim Chalmers acknowledged the war would worsen inflation but declined to interfere with the RBA’s independent decisions, highlighting the economic uncertainty ahead.
✓ Verified by 2+ sources
Key details reported by multiple sources:
- February annual inflation was 3.7%, down slightly from 3.8% in January, with underlying inflation steady at 3.3% (Guardian, News.com.au, ABC).
- The Reserve Bank of Australia (RBA) raised interest rates in March 2026, with markets anticipating at least two more hikes this year (Guardian, News.com.au).
- Petrol prices in Australia surged by over 56 cents per litre (29% increase) since the Iran war began on February 28, 2026 (Guardian).
- Brent crude oil prices reached $US103 ($A148) in March 2026, pushing Australian petrol prices above $2.40 per litre (News.com.au).
- The RBA’s Statement on Monetary Policy forecast June 2026 inflation at 4.2%, but economists warn it could exceed 5% due to the Iran conflict (Guardian, News.com.au, ABC).
- The March 2026 RBA rate rise was justified by persistent underlying inflation and new risks from the Middle East conflict (News.com.au).
- Treasurer Jim Chalmers stated the Iran war would worsen Australia’s inflation challenge, with Treasury modelling showing prolonged conflict could slow growth (News.com.au, ABC).
- The February inflation data was recorded before the Iran war began, with March figures expected to reflect the energy price spike (Guardian, ABC).
- Consumer inflation expectations surged to a record 6.9% in March 2026, up 1.7% in four weeks (News.com.au).
- The RBA’s preferred trimmed mean inflation rate (underlying) was 3.3% in February 2026 (Guardian, News.com.au, ABC)
Points of Difference
Details reported by only one source:
- The RBA governor explicitly stated ‘we don’t want to have a recession, but if it’s hard to get inflation down, then you know we’re to have to deal with that possibility’ (Guardian).
- Markets initially priced a cash rate rise to 4.1% before the Iran bombing, then jumped to 4.6% by Christmas after RBA signals, with a brief spike to 4.85% (Guardian).
- Petrol prices in Sydney averaged 166.0c/litre in February, jumped to 189.9c/litre by month-end, and reached 248.7c/litre by mid-March (Guardian).
- The Antipoverty Centre and Greens called for suspension of jobseeker mutual obligations due to rising petrol costs (Guardian).
- The RBA’s December 2025 enterprise bargaining data showed average wage rises of 3.7%, the lowest since mid-2023, contradicting claims of wage-driven inflation (Guardian).
- The RBA’s Statement on Monetary Policy (February 2026) attributed inflation spikes to rising profit margins, not wages (Guardian).
- The RBA is likely to blame workers for inflation even if it causes a recession (Guardian).
- The RBA’s cash rate was briefly priced at 4.85% by markets before ‘calming down’ (Guardian).
- MCL senior economist Bob Cunneen warned budgets would face a ‘double whammy’ of rising costs and interest rate hikes (News.com.au).
- Global X’s Marc Jocum called February’s inflation data ‘the calm before the storm’ and warned Australia ‘has seen this movie before’ with post-Covid transitory inflation (News.com.au).
- BDO chief economist Anders Magnusson stated the RBA’s March rate hike was ‘prudent’ when combining domestic inflation data with Middle East conflict risks (News.com.au).
- Treasurer Jim Chalmers refused to comment on whether rising fuel costs act like interest rate hikes or if the RBA should hold rates (News.com.au).
- Chalmers stated the government was focusing on fuel supply, regional distribution, and international engagement but ruled out waiving the fuel excise (News.com.au).
- Major banks now forecast inflation pushing towards 5% this year, diverging from the RBA’s February projection of a 4.2% peak (News.com.au).
- Westpac’s Luci Ellis noted automotive fuel prices fell 3.4% in February, which could mislead on the true inflation picture (ABC).
- The RBA warned the Middle East conflict could push inflation higher, but the immediate impact would only be known in March’s CPI data (ABC).
- Dr Ellis said the RBA wants to prevent higher inflation expectations from becoming embedded (ABC).
- The RBA’s monetary policy board cited a ‘tight labour market and capacity pressures’ as key factors for the March rate rise (ABC).
Where the reporting differs
Details that conflict, or appear in only some outlets:
- The Guardian reports markets briefly priced the cash rate at 4.85%, while News.com.au does not mention this specific spike.
- The Guardian states the RBA’s December 2025 wage rises were 3.7% (lowest since mid-2023), but ABC does not discuss wage data in detail.
- The Guardian highlights the Antipoverty Centre and Greens calling for suspension of jobseeker mutual obligations, while News.com.au and ABC do not mention this.
- News.com.au reports major banks now see inflation pushing towards 5%, while the Guardian does not specify bank forecasts beyond market pricing.
- The Guardian attributes the February inflation spike to rising profit margins, while ABC focuses on housing and food as the largest contributors without discussing profit margins.
Source Articles
Rising profit margins turbo-charged Australia’s latest inflation figures – but something worse is just around the corner | Greg Jericho
Fuel supply shock from Iran – not too many wage rises – will be the driver of higher figures in June It is rare for economic data to be out of date the moment it is published – and yet that is the case with the February inflation figures out on Wednesday at 11.30am. By 11.31am they had been digested and ignored amid a flurry of “before the full impact of the Iran war” comments. In February, annual inflation was 3.7%, down slightly from 3.8% in January, with underlying inflation unchanged at 3.3%
Stubborn inflation keeps rate rise on the cards
Fresh data shows Australia’s inflation rate remains stubbornly high, with further pain to come from the Iran war, raising expectations of another rate rise.
Inflation cooled slightly in February, prior to Iran war energy price spike
The latest monthly data does not capture the recent rise in energy prices caused by the war in the Middle East, which began on February 28.
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