New advice reveals why Treasurer Jim Chalmers continues to blame Middle East oil crisis for high inflation
Treasurer Jim Chalmers has been given advice from his own department about the effects of the Iran war.
New Government advice has revealed that Treasurer Jim Chalmers is continuing to blame the Middle East oil crisis for Australia’s inflation problem as public sector wages continue to soar under Labor.
During the week of the May 12 Budget, a Treasury ministerial submission to Dr Chalmers argued 72 per cent of businesses were “negatively impacted” by fuel prices or availability issues.
More than a third or 36 per cent reported revenue had dropped during the previous four weeks while just over a quarter or 27 per cent expected their revenue to fall over coming weeks.
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By continuing you agree to our Terms and Privacy Policy.About two-thirds of businesses — 60 per cent — reported “making changes to business operations due to fuel prices or availability in May”.
The ministerial submission — titled Middle East Update — was dated May 8-15, during the week of the May 12 Budget with credit given to Tim Baird, the assistant secretary of Treasury’s financial system division, and Penny Sirault, the assistant secretary of Treasury’s labour markets, industry and infrastructure division.
The advice was given five weeks after fuel excise was temporarily halved by 32 cents a litre, before it was extended beyond July 1 for another month at a tapered rate of 16 cents a litre.
Higher prices for goods and services made in Australia are continuing to be the key driver of inflation instead of imported price pressures, with Reserve Bank governor Michele Bullock on Tuesday noting public demand was adding to total aggregate demand.
Generous public sector wage increases are another factor with Commonwealth pay levels soaring by 7.2 per cent during the last financial year, which was double June’s annual inflation pace of 3.8 per cent, new Australian Bureau of Statistics data revealed on Thursday.
Sean Crick, the ABS’ head of labour statistics noted public administration and safety, education and training and care economy jobs together accounted for 90 per cent of public sector jobs and wages.
Health care and social assistance recorded the strongest rate of growth in 2025-26 for both jobs and wages, with the wages bill surging by 8.5 per cent as 29,700 new jobs in that field were created at the State and Federal level.
Under Prime Minister Anthony Albanese’s watch, Commonwealth Government pay levels had doubled from 4.9 per cent in 2022-23 to 9.9 per cent in 2023-24 before moderating slightly to 9.4 per cent in 2024-25.
Ms Bullock blamed domestic inflationary pressures for hiking rates for the fifth time in 2026 to an 18-year high of 4.85 per cent, stressing the Middle East oil crisis had not sparked the latest 25 basis point increase.
“I want to be very clear that we are not tightening monetary policy because of the direct impact of oil prices on inflation,” she said.
“I know there is confusion in the community, so I want to be very clear. Monetary policy cannot impact global oil prices.
“Rather, the tightening in monetary policy is to address domestic capacity pressures.”
