MARK RILEY: Inflation, interest rates, fuel hikes - the huge cost every Aussie will pay for Trump’s Iran war

Donald Trump started the war in Iran, but Anthony Albanese and Jim Chalmers will wear the blame for the pounding it is unleashing on the Australian economy.

And Australian consumers will pay the price.

That is a massive risk for the Government.

The Australian electoral landscape is already being comprehensively repainted in disappointment and disillusionment.

Generational allegiances are breaking down, traditional supporter bases are fast eroding as frustrated voters drift away from the parties of government towards those of grievance.

And now voters have something new and big to complain about.

The price of petrol is through the roof and despite the Government’s assurances, people continue to deplete stocks through panic-buying.

It is the definition of a vicious cycle.

Australia’s domestic fuel supplies are more than adequate to deal with the current crisis for the time being.

But panic-buying is depleting stocks at service stations quicker than the fuel tankers can refill them.

That causes practical shortages at the bowser, driving more panic-buying, which further depletes service station stocks even further and on it goes.

Petrol is to this war what toilet paper was to COVID.

The Reserve Bank’s decision to increase interest rates for the second consecutive month further adds to this growing impression of economic crisis.

Not only are people paying $50 or $60 more for a tank of fuel, but they are also now going to pay $100 more on average monthly mortgage repayments.

It all adds up. Or, rather, it all subtracts from family budgets already drained by a cost-of-living crisis.

And now the Government is preparing voters for the second-phase impacts on the economy that could be much deeper and spread the pain for much longer.

In his pre-Budget positioning speech on Thursday, Treasurer Jim Chalmers referenced Treasury modelling of the potential impact of the war.

It has produced three possible scenarios, although Chalmers has only made two public.

The third, worst-case scenario might be too shocking to release.

In the best-case outlook, Treasury assumes the oil price remains at around $US100 a barrel over coming months before returning to pre-conflict levels by year’s end.

That is based on Donald Trump and Benjamin Netanyahu or the Iranian regime bringing a swift end to the war.

The second scenario assumes a more protracted conflict with oil hovering around $US120 a barrel and taking three years to fall back to its previous levels.

The estimated cut to Australia’s economic growth is 0.2 per cent under the first scenario and 0.6 under the second.

They might not sound like big figures. But that is between $6 billion and $16b in a single year.

And that is a lot of money.

The biggest enemy is inflation. It had dropped to just 1.9 per cent in June last year. Jim Chalmers declared at the time that the economy had turned a corner.

Angus Taylor now says it must have been the wrong corner. Inflation has since doubled to 3.8 per cent.

Chalmers conceded in his pre-Budget address that the Treasury modelling now suggests inflation could hit the high 4s and maybe even 5 per cent this year.

And that means more interest rate hikes are on the way and more across-the-board price rises at the supermarket, restaurants, hotels, construction, travel and elsewhere.

Reserve Bank governor Michele Bullock made clear this week that the war’s impact on petrol prices wasn’t a factor in this week’s rate rise.

Existing domestic inflationary pressures were.

Chalmers conceded that point, although baulked at Bullock’s suggestion that it might take a recession to get inflation back under control in the longer term.

But the Treasurer is now trying to draw a line at February 28, when the first bombs fell on Tehran, and suggest that most of the inflationary pain ahead will be as a result of the war.

On that, he has an argument. But in the political context it won’t matter.

Governments are always held responsible.

The Rudd government was punished for the economic impacts of the Global Financial Crisis, the Morrison government for the financial cost of COVID and the Albanese Government will be held politically accountable for the explosive fiscal impact of this war.

That is just a fact.

And for that, they can thank Donald Trump.

Mark Riley is the Seven Network’s political editor