Reserve Bank of Australia (RBA) Governor Michele Bullock has cautioned that potential fuel shortages could significantly disrupt the nation's economy, describing such an outcome as a "very different world" compared to current projections. This warning comes amid ongoing instability related to the conflict in Iran, which the central bank said is expected to weigh on economic growth and unemployment over the coming years.
In its latest Statement on Monetary Policy, the RBA outlined three new GDP growth scenarios, all reflecting slower economic expansion and rising joblessness due to global uncertainties linked to the Middle East conflict. The central bank revised its baseline growth forecast downward, projecting 1.3 percent growth by the end of the year—a decrease from its previous estimate of 1.8 percent. Inflation is expected to peak at 4.8 percent next month, with unemployment forecasted to rise steadily through 2025 and beyond.
The bank’s most optimistic scenario assumes that the Middle East conflict will resolve within two months and that Brent crude oil prices will average just above $100 per barrel in the June quarter. However, oil prices surged on Tuesday amid renewed Iranian and U.S. military activity in the region, with Brent crude trading near $114 per barrel, casting doubt on the ceasefire’s stability.
While the RBA’s projections incorporate the impact of higher energy prices and weaker global growth, all scenarios assume Australia's imported fuel supply remains stable and government emergency measures, such as activation of stage three of the national fuel security plan, will not be necessary.
Governor Bullock emphasized the severity of potential fuel supply disruptions, expressing concern about the economic consequences if shortages materialize. "If that were to happen, I think we’re in a very different world," she said, adding that such an event would prompt a reassessment of economic conditions by the RBA board.
Recent reports have indicated jet fuel shortages looming in Australia, with international airlines warning of tight supply as shipments have dropped to record lows and prices escalated further. The government has responded by accelerating efforts to secure additional diesel and petrol supplies, including passing emergency legislation to facilitate purchases of fuel on the spot market and engaging with mining companies to bolster fuel security.
The RBA also noted in its policy statement that the economic effects of any fuel shortages remain uncertain and raised the possibility that governments might introduce measures to support households and businesses impacted by rising energy costs. However, Bullock warned that such fiscal support could complicate the central bank’s efforts to control inflation.
The statement followed the RBA’s decision to raise interest rates for the third consecutive meeting, as it continues to balance the challenges posed by inflationary pressures, global geopolitical risks, and domestic economic conditions.