Oil at US$113 adds $36 to Australian fuel bills as Treasury cuts growth outlook

Australian Treasurer Jim Chalmers is preparing to announce lower economic forecasts for the December mid-year budget update.

The downward revision reflects slower growth and higher unemployment expectations driven by rising global energy prices.

Global benchmark oil prices rose to US$113 a barrel overnight. This level is close to the April peak of nearly US$120.

The price increase stems from a widening conflict in the Middle East following attacks on Iran by the United States and Israel.

Australian motorists now pay 60 cents more per litre than they did before the strikes.

This price difference adds $36 to the cost of filling a standard 60-litre fuel tank.

Families that refuel weekly face an additional monthly cost of $144 compared to February levels.

Treasurer Chalmers acknowledged the shifting outlook in a speech last week. He had previously suggested the economy would be 'a bit better' within a year.

The Reserve Bank of Australia faces a complex situation with high inflation and low growth.

Reserve Bank Governor Andrew Hauser described the current economic mix as a central banker's 'nightmare'.

A fifth interest rate rise is possible on 3 November to manage inflationary pressures.

The New York Times reported that the US and Israel have drawn up plans to resume attacks on Iran after the American midterm elections. Such an escalation could push oil prices toward US$150, a scenario also warned against by the International Monetary Fund earlier this month. Westpac analysts noted this risk in recent assessments. The global economy is also facing stress from the artificial intelligence sector. Heavy spending on AI infrastructure has masked other economic weaknesses, but investors are concerned about rising corporate debt. This anxiety triggered a steep sell-off on Wall Street overnight. Community opposition to new datacentre construction may slow the sector's expansion, adding to short-term economic stress. Talk of a tech bubble is increasingly common in financial markets. High government spending in Australia complicates the fight against inflation, a point frequently raised by the opposition. Productivity growth is slowing, meaning the economy hits its capacity limit sooner and inflation remains high at lower growth rates. Chalmers stated that some economic pressures are outside Canberra's control. He told Politico that decisions made in Washington, Tehran, and Eastern Europe are pushing up global inflation and weighing on growth. 'The pressures on people right now are very substantial and obviously that keeps me awake at night,' Chalmers said. He noted that the government can manage the budget responsibly and provide cost-of-living help, but remains dependent on foreign policy decisions. The government faces difficult choices to address voter discontent. Cutting the fuel excise temporarily would lower petrol prices but reduce the Reserve Bank's ability to control inflation. Alternatively, announcing large spending cuts in the December update would help the central bank but could further weaken the economy and increase unemployment. Hauser described the current situation as a 'world of hard choices' where fixing one problem often worsens another.