Reserve Bank Set for Third Rate Hike as Inflation Hits 4.6% Amid War-Driven Oil Spike

The bank’s move follows two earlier hikes this year aimed at cooling demand. Inflation’s latest reading shows consumer prices up 4.6% over the twelve months to March, the highest level since early 2023. The jump stems largely from tighter global oil supplies after the conflict disrupted exports, pushing petrol prices higher. At the same time, federal outlays now represent the largest share of GDP in four decades (excluding the pandemic period), adding demand‑side pressure that predates the war.

- The Reserve Bank’s policy rate is forecast to rise by 25 basis points to 4.35%. - Brent crude climbed roughly 3% to about $89 per barrel after the latest supply concerns. - The S&P/ASX 200 index (^AXJO) slipped 0.6% to 7,320 points, while BHP Group Ltd (BHP.AX) fell 1.2% to $44.80, giving it a market‑cap of roughly A$180 billion. - Woodside Energy Ltd (WDS.AX) gained 2.3% to $30.10, reflecting its A$30 billion market‑cap and sensitivity to oil prices. - Government spending now accounts for about 28% of GDP, the highest proportion since the early 1980s outside of pandemic stimulus.

Higher rates increase borrowing costs for households and businesses, which tends to dampen spending and ease price pressures. The oil shock raises production and transport costs, feeding directly into inflation through higher fuel and energy prices. Elevated government expenditure adds to overall demand, potentially offsetting some of the tightening effect of rate hikes. Together, these forces suggest inflation may remain above the bank’s 2‑3% target for several more months. Watch for the April inflation print, the Reserve Bank’s statement after Tuesday’s decision, and any further developments in Middle East oil supplies that could sway price trends.