SYDNEY, March 18 (Reuters) – New analysis from Australia’s Treasury on Wednesday forecast higher inflation and a bigger economic hit from the ongoing conflict in the Middle East, that has unleashed a global oil shock and driven up commodity prices.
The Treasury considered two scenarios in its latest analysis that incorporated lower global growth and higher prices for LNG, coal and fertilisers, said Treasurer Jim Chalmers.
In a short-term scenario where oil prices stay at the current $100 a barrel for the first half of the year and gradually return to pre-conflict levels by year-end, inflation will peak 0.75 percentage point higher and economic output will be 0.2% lower.
In a more prolonged scenario where oil prices reach $120 per barrel in the first half of the year and then take three years to return to pre-conflict levels, inflation would be 1.25 percentage points higher and the economy would take a longer term hit, with GDP 0.6% lower around 2027.
(Reporting by Stella QiuEditing by Alasdair Pal)
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