Australia’s gas price crisis will stoke inflation and crimp economic growth if it drags on, according to economists.
Australia’s gas price crisis will stoke inflation and crimp economic growth if it drags on, according to economists, but the effects will be partially offset by strong consumer demand for the remainder of the year.ahead of the Reserve Bank of Australia’s June board meeting also revealed a strong divide about the bank’s next interest rate move.Just under half tipped a 40 basis point increase on Tuesday, while 11 believe the bank would proceed with a “businesses as usual” rise of 25 basis points.
With spiking gas prices dominating Labor’s first fortnight in office and prompting the first round of criticism from the opposition,“Higher energy prices – gas and electricity – will be a drag for most businesses and households,” Mr Fabo said.KPMG chief economist Brendan Rynne said the gas crisis was driven by domestic factors such as a cold snap and increased pressure on gas electricity generation while 6000MW of coal plants were stood down.
Mr Fabo said households would be worse off with higher gas and electricity prices. “If utilities prices rise circa 20 per cent over a year, that’s a 1 percentage point boost to inflation and a drag on real income growth,” he said.
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