Chalmers warns Iran war is economic disaster for Australia

Australian Treasurer Jim Chalmers has warned that the ongoing US-Iran war is posing significant economic challenges, primarily through higher petrol prices, rising interest rates, and increased debt servicing costs. Speaking on ABC television, Chalmers described the conflict as an economic disaster, citing its role in driving up global inflation and borrowing costs. He emphasized that the longer the war continues, the greater the damage to both the Australian and global economies.

Chalmers acknowledged that while the Reserve Bank of Australia (RBA) has raised interest rates to a 15-year high, government spending is not the primary driver of inflation. Instead, he pointed to energy-driven inflation as the main channel through which the Iran war impacts the Australian economy. He also highlighted that rising bond yields will add billions to the cost of servicing public debt, intensifying pressure on government budgets.

The treasurer announced plans to travel to Japan to meet Finance Minister Satsuki Katayama, focusing on fuel security and closer economic ties. The visit underscores how energy-importing economies in Asia are coordinating their response to the oil shock caused by the conflict. Chalmers expressed optimism that Australia would avoid a recession but acknowledged the war's negative effects on global growth.