Treasurer warns oil prices won’t return to normal until 2030

Treasurer Jim Chalmers has shared a grim update for motorists, saying oil prices are not expected to drop to normal until the end of the decade.

In a speech to an economic forum on Friday, he said the Ukraine and Iran wars have exposed the fragility of the global economy.

“We’re not immune from the consequences of two wars, both impacting almost every economy in one way or another, posing risks to global growth, pushing up global inflation, and pushing up borrowing costs,” he said.

With oil prices above $100 a barrel for most of the past six weeks, Chalmers said the markets do not expect prices to return to pre-conflict levels until 2030.

Australian motorists are already paying more than $2 a litre at the bowser with the latest national average at $2.42.

Higher-than-average fuel prices has caused inflation to jump to 4 per cent in the 12 months to August as costs rose by 14.8 per cent in the month alone.

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“This was driven by higher world oil prices and the unwinding of the remainder of the federal governments fuel excise relief measures in August,” Australian Bureau of Statistics head of price statistics Rachael McCririck said at the time.

September’s inflation figures will come out next week.

Chalmers noted that markets are not expecting inflation to fall back within the 2 to 3 per cent target range anytime soon.

“That means markets now expect multiple interest rate rises in every major advanced economy over the next 12 months,” he said.

Australians have already copped four rate rises this year, bringing the cash rate up to a 15-year high of 4.6 per cent.

Remarks by the Reserve Bank deputy governor Andrew Hauser on Wednesday, in which he said the inflation outlook is “materially worse” than what was previously projected, have raised the possibility of another hike in November.

Reserve Bank and Treasury do not expect inflation to fall within target range until the next 12 months.

Chalmers said the current combination of high inflation and interest rates will likely mean “softer growth and slightly higher unemployment” ahead of the Mid-Year Economic and Fiscal Outlook.

Australia’s unemployment rate unexpectedly jumped to 4.7 per cent in September in what is the worst result since October 2021, when the country was only just emerging from COVID-era lockdowns.

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Shadow treasurer Tim Wilson has once again blamed the federal government for its spending, which he said is fuelling inflation.

“Markets are now betting on another rate rise in November, and economists are putting a 50-50 chance on recession,” he said.

“Our Titanic Treasurer has been warned about the iceberg of taxes, spending and regulation, and his only response is to shout, ‘full steam ahead’.”