Australia’s inflation outlook amid Middle East conflict and RBA rate decisions
Consensus Summary
Australia’s inflation outlook in early 2026 is dominated by the February CPI report, released before the US/Israel-Iran conflict escalated, showing a slight dip to 3.7% year-on-year but still above the RBA’s 2-3% target. All sources agree the war’s energy price shock—already pushing petrol costs up 29% in Sydney—will worsen March’s inflation data, with expectations exceeding 5%. The RBA’s March rate hike, the second in 2026, was justified by persistent underlying inflation and new geopolitical risks, though the Guardian notes markets initially underestimated the RBA’s hawkishness post-war. Consensus facts include the trimmed mean rate at 3.3%, Brent crude at $103/barrel, and Chalmers’ warnings about economic strain, but the Guardian uniquely highlights profit-driven inflation and declining wage growth as counterpoints to RBA narratives. Contradictions arise between sources framing Chalmers’ tone—ABC emphasizes his dire warnings while the Guardian softens them—and differing interpretations of wage vs. profit inflation drivers. The RBA’s next move in May hinges on March data, with all parties agreeing the Middle East conflict has elevated uncertainty, though opinions diverge on whether the response should prioritize rate hikes or policy flexibility.
✓ Verified by 2+ sources
Key details reported by multiple sources:
- February CPI rose 3.7% year-on-year, down 0.1% from January’s 3.8%, with underlying inflation steady at 3.3% (ABC, Guardian, News.com.au).
- The Reserve Bank of Australia (RBA) lifted interest rates for the second time in 2026, citing a tight labour market and capacity pressures (ABC, News.com.au).
- The US/Israel-Iran conflict began on February 28, 2026, and energy price spikes from the war are expected to impact March CPI data (ABC, Guardian, News.com.au).
- Treasurer Jim Chalmers warned the Middle East war could push inflation above 5% and worsen economic growth (ABC, News.com.au).
- Unleaded petrol prices in Sydney averaged 166.0c/litre in February but surged to 248.7c/litre by mid-March, a 29% increase since the conflict began (Guardian, News.com.au).
- The RBA’s trimmed mean inflation rate (3.3%) remains above its 2-3% target band (ABC, News.com.au).
- The March RBA rate rise was justified by ‘persistently high underlying inflation and new upside risks’ from the Middle East conflict (News.com.au).
- Brent crude oil prices were at $103/barrel ($148 AUD) in March, contributing to rising Australian petrol costs (News.com.au).
- The Australian Bureau of Statistics (ABS) released February CPI data on March 13, 2026 (ABC, Guardian, News.com.au).
- The RBA’s Statement on Monetary Policy forecast June 2026 inflation at 4.2%, but market expectations now exceed 5% due to the war (Guardian, News.com.au)
Points of Difference
Details reported by only one source:
- Westpac chief economist Luci Ellis predicted headline inflation could rise to around 5% due to the energy price shock from the Iran war (ABC).
- Dr Ellis noted fuel price spikes had increased inflation expectations, which the RBA aims to prevent 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 hike (ABC).
- Treasurer Jim Chalmers explicitly stated the war would ‘make Australia’s inflation challenge worse’ (ABC).
- The Guardian highlighted that February’s inflation data was outdated by 11:31 AM on release due to immediate market focus on the Iran war (Guardian).
- Investors initially underestimated the RBA’s resolve to raise rates post-war, with cash rate expectations jumping from 4.1% to 4.6%+ by mid-March (Guardian).
- The Guardian cited the Antipoverty Centre’s call for suspension of mutual obligations for jobseeker recipients due to fuel cost hikes (Guardian).
- Wage growth in December 2025 Q3 enterprise bargaining agreements averaged 3.7%, the lowest since mid-2023, contradicting RBA claims of wage-driven inflation (Guardian).
- The Guardian emphasized that profit margins (not wages) were the primary driver of late-2025 inflation, citing GDP data (Guardian).
- Consumer inflation expectations surged to a record 6.9%, up 1.7% in four weeks, per Guardian reporting (Guardian).
- Global X strategist Marc Jocum warned Australia had ‘seen this movie before’ with ‘transitory’ inflation claims (Guardian).
- MCL senior economist Bob Cunneen specifically warned of a ‘double whammy’ of rising costs and interest rate hikes for mortgage holders (News.com.au).
- Global X’s Marc Jocum stated Australia’s petrol prices were ‘frozen in time’ before the Middle East tensions escalated (News.com.au).
- BDO chief economist Anders Magnusson noted the RBA’s March hike was ‘prudent’ when combining domestic data with ‘new, material upside risks’ (News.com.au).
- News.com.au quoted Chalmers refusing to ‘waive the fuel excise’ despite rising costs, calling it ‘not something we have been considering’ (News.com.au).
- Chalmers compared the Middle East conflict to the ‘fifth big economic shock in less than two decades,’ requiring tailored responses (News.com.au).
Where the reporting differs
Details that conflict, or appear in only some outlets:
- The Guardian reports wage growth in December 2025 Q3 EBA agreements was 3.7% (lowest since mid-2023), while ABC and News.com.au do not mention this specific figure or context.
- The Guardian states profit margins—not wages—were the primary driver of late-2025 inflation, contradicting ABC’s focus on wage and capacity pressures as RBA concerns.
- ABC and News.com.au cite Chalmers warning inflation could exceed 5%, but the Guardian implies Chalmers’ comments were more cautious, framing his remarks as ‘pleased inflation came off slightly.’
- The Guardian highlights market expectations for the cash rate reaching 4.85% briefly before ‘calming down,’ while ABC and News.com.au do not reference this specific peak figure.
- News.com.au quotes Chalmers refusing to advise the RBA on fuel excise changes, but ABC does not address this specific policy stance or debate.
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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