Australians are bracing for rising costs across multiple sectors as the conflict in Iran disrupts global energy markets and supply chains. Automotive dealers report a surge in electric vehicle (EV) sales, spurred by escalating petrol prices, while economists predict faster-than-expected interest rate hikes and increased mortgage burdens.
The Australian Automotive Dealer Association (AADA) CEO, James Voortman, stated that dealerships are experiencing a significant uptick in EV inquiries, and purchases. “Most of the dealers think they will have a very big March in terms of EV sales,” Voortman said, noting that many prospective buyers previously hesitant about switching to electric vehicles are now making decisions due to rising fuel costs. The Tesla Model Y and BYD Sealion 7 are currently the top-selling EV models in Australia, with EVs and hybrids now accounting for roughly one-third of all modern car sales.
The surge in fuel prices is expected to fuel broader inflationary pressures. Oil prices are a key driver of global inflation, impacting the cost of goods and services. The ASX’s rate tracker now indicates a 66% probability of an interest rate increase on Tuesday, a substantial jump from 22% just a week prior. Australia’s major banks – the “big four” – are all forecasting rate rises in both March and May.
Canstar analysis suggests that a homeowner with an $800,000 mortgage could face an additional $363 in monthly repayments by May if the banks’ predictions hold true. However, Canstar’s data insights director, Sally Tindall, cautioned that the longer-term outlook remains uncertain, as a significant escalation of the conflict could ultimately necessitate a reversal of rate hikes to mitigate economic damage.
Beyond automotive and mortgage costs, the conflict is impacting travel, freight, and even medical supplies. D&D Worldwide Logistics reports that Australian businesses should prepare for further increases in freight costs, citing fuel surcharges from road transport operators and anticipated hikes in ocean and air freight rates. Airlines, including Qantas, AirAsia, Cathay Pacific, and Thai Airways, are already increasing airfares as travellers shift away from Middle Eastern stopover destinations.
Jet fuel prices have climbed to levels not seen since the 2022 Russian invasion of Ukraine. Rising fuel and fertiliser costs are also expected to translate into higher food prices for consumers. Australian farmers are facing a more than 30% increase in the price of urea, a key fertiliser ingredient, according to Trading Economics, as the Middle East – a major urea producer – experiences disruption.
The rising cost of crude oil is also impacting the plastics industry. Australia imports over 90% of its plastic supply, making it vulnerable to fluctuations in global oil prices. Roelof Vogel, a circular economy researcher, suggests that sustained high oil prices could develop recycled plastic a more economically viable alternative for Australian businesses, potentially overcoming the current cost disadvantage of approximately 50% compared to virgin plastic.
Perhaps unexpectedly, the conflict is also raising concerns about the supply of helium, a critical industrial gas used in MRI machines and research technology. Qatar, which produces roughly a third of the world’s helium as a byproduct of liquefied natural gas production, has halted production following an Iranian strike on the Ras Laffan Industrial City. While the Australian government has stated it is monitoring the situation, the potential disruption to helium supply is a concern for hospitals and research facilities nationwide. Australia’s only helium plant closed in 2023, with a new company, Natural Helium Tasmania, not expected to begin operations for another 18 months.
