Australia Treasury warns Middle East war could worsen economic pressure
Australia's Treasury has warned that the economic risks from the continuation of the war in the Middle East are increasing. The warning comes as the federal government weighs whether to extend fuel excise relief into August. It also lands just days before the latest inflation figures are due, ahead of the Reserve Bank of Australia's next board meeting.
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Treasurer Jim Chalmers has said the government is monitoring developments closely and has not ruled out extending the discount on petrol and diesel. The current relief, worth about 16 cents per litre, is due to end on Sunday after a previous three-month cut to the fuel excise and heavy vehicle road-user charge. Prime Minister Anthony Albanese and Mr Chalmers have both indicated the support will not last forever, while leaving open the possibility of a further extension.
The Treasury briefing said oil prices have risen since the unravelling of a memorandum of understanding between the United States and Iran. It also said the world now has weaker buffers to absorb further disruption to oil supply. According to the briefing, the initial phase of the conflict saw the energy price shock partly contained through re-routing of exports, a drawdown in oil inventories and some reduction in demand.
The warning matters because fuel prices feed directly into household costs and broader inflation, which is already under close watch in Australia. Diesel remains markedly above pre-war levels across the country, even though it is below the peaks seen in late March. Petrol prices are more mixed, with some major cities now below the pre-war benchmark while others remain above it.
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The government's decision on fuel relief is now tied to a wider economic assessment of how long the conflict may continue and how much further it could affect prices. Mr Chalmers said Australians have already paid too high a price for the conflict and argued that a proper and permanent end to the war would help inflation and growth. The Treasury's assessment suggests policymakers are concerned that the impact could deepen if oil markets face more disruption.
What remains unclear is whether the government will extend the fuel excise discount into August, and how much weight it will give to the latest inflation data before the Reserve Bank meets. The next official price figures are due on Wednesday and will be the final release before that meeting. For now, the warning points to a policy choice between short-term household relief and the risk of adding to budget pressure.
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