What do war, interest rate rises and oil at $200 a barrel mean? A recession

March 12, 2026 — 7:30pm

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It took a once-in-a-century pandemic to drive Australia into its first recession in a generation. It could take oil prices at $US200 a barrel and an inflation breakout to again push the nation to the economic brink.

Since the war against Iran was unleashed by Israel and the United States, fears of a lift in inflation have prompted expectations that the Reserve Bank will unleash its own version of “shock and awe”.

Economists at the big four banks in the past two days have tipped the RBA will follow up its February rate rise with increases next week and in May, just days ahead of Jim Chalmers’ fifth budget.

All believe the bank, which has failed to hold inflation within its 2-3 per cent target band for the past decade, will deliver the first back-to-back-to-back rate rises since the end of the pandemic to stop inflation in its tracks.

The expectations of interest rate rises sharpened after RBA deputy governor Andrew Hauser noted the war in Iran, and its impact on oil prices, were clearly going to make the job of bringing inflation under control more difficult.

Chances of interest rate pain grow on inflation threat

Markets, unsurprisingly, took this as a signal that when the Reserve Bank’s monetary policy committee meets next week, it will sign off on taking the cash rate to 4.1 per cent and 4.35 per........

© The Age