Treasurer Chalmers Warns Inflation Could Exceed 5%, Economy Faces Prolonged Impact — Sydney Auction Clearance Rate at 58%

Weekly Market Focus

Australia’s Treasurer Jim Chalmers has warned that inflation could exceed 5% if the conflict in the Middle East persists, posing a prolonged risk to the economy. As oil prices surge and supply chains come under strain, businesses are reverting to contingency strategies reminiscent of the pandemic era, preparing for potential disruptions across key sectors such as construction, healthcare and food supply.

At the centre of the current crisis is the potential closure of the Strait of Hormuz, one of the world’s most critical energy corridors. Any disruption to this route would not only drive up oil prices but also affect the supply of essential inputs such as fertilisers and plastics. Prime Minister Anthony Albanese has indicated that a “national fuel coordinator” will be appointed, working with states and territories to manage fuel reserves and distribution in the event of supply shortages.

Treasury modelling suggests that if oil prices remain above US$100 per barrel, inflation could rise to around 5%. Should prices climb further to US$120 per barrel and remain elevated for several years, inflation could exceed 5.5%, while economic growth would be dragged lower. By 2027, GDP is projected to be about 0.6% below its baseline level, with the economic impact potentially lasting for years.

Meanwhile, both government and businesses are accelerating contingency planning to ensure adequate supplies of critical fuels such as diesel, which are essential for transport, agriculture and construction. Although Australia’s fuel supply remains sufficient for now, rising demand and increasing global uncertainty mean that energy security, inflation pressures and slowing economic growth are emerging as a threefold challenge facing the country.

Last Week’s Auction Results

Sydney: A total of 1,326 properties were taken to auction, with results reported for 828 properties. Of these, 479 were sold, resulting in a clearance rate of 58%. The total auction value reached AUD 557,869,576, with a median price of AUD 1,606,500.

Melbourne: A total of 1,347 properties were taken to auction, with results reported for 1,020 properties. Among them, 604 were sold, achieving a clearance rate of 59%. The total auction value amounted to AUD 457,200,527, with a median price of AUD 951,000.