War could add an extra 5% to prices in Australia – but there’s one sector that shields the economy

A drawn-out war in the Middle East could add an extra 5% to existing inflation in Australia, our new modelling shows.

We looked at the likely impacts of two different scenarios: a moderate disruption with the war ending in mid-April, and a drawn-out war ending by September.

We found higher fuel costs would affect freight, food production and manufacturing – pushing up costs for all kinds of goods, from steak to steel. At the same time, economic growth is likely to slow.