Grim warning for workers with inflation set to hit a three-year high
Inflation is projected to reach a three-year high of around 5.4% by mid-2026, driven by surging petrol prices linked to the war against Iran, with warnings of slowing economic growth and rising unemployment. Analysts predict stagflation could emerge, potentially pushing over 100,000 Australians out of work. The Reserve Bank is monitoring underlying inflation closely, while the federal government prepares a budget focused on economic resilience. Higher commodity prices may boost tax revenue, but increased welfare costs and spending pressures could offset gains.
- ▪Inflation is expected to hit 5.4% by mid-2026, the highest level since 2023, due to a surge in petrol and transport-related prices.
- ▪Petrol prices rose 37% last month, contributing to broader cost increases across goods and services.
- ▪Westpac forecasts economic growth to slow to 1% in 2026 while unemployment rises to 5%, meeting the definition of stagflation.
- ▪The May 12 federal budget will emphasize 'resilience' with proposed tax reforms, including changes to capital gains tax and negative gearing.
- ▪Higher commodity prices could increase government revenue by $23 billion to $55 billion over four years, but rising welfare costs may offset some gains.
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