The calm before the storm is still visible in Wednesday's data
Australia's February inflation figures, due Wednesday, will offer a brief and misleading calm — a final portrait of the economy before the full weight of Middle East conflict-driven energy costs reshapes the national price landscape. The data is expected to show a modest easing to 3.7 per cent, yet this number belongs to a world that no longer quite exists. In the months ahead, fuel surges, aviation costs, construction pressures, and cascading supply-chain effects will push inflation toward five per cent, forcing the Reserve Bank to confront a rate decision shaped not by what Wednesday reveals, but by what it conceals.
- Fuel prices are already climbing toward three dollars a litre, and economists expect a further 25 per cent surge through March alone — a shock the February data has not yet absorbed.
- The disruption will not stop at the petrol station: airlines, construction firms, logistics operators, and manufacturers are all preparing to pass their rising energy costs forward, sector by sector, month by month.
- Wednesday's figures will look reassuring precisely because they are outdated — a statistical snapshot of calm taken just before the storm made landfall.
- Money markets have already doubled their bets on a May rate hike, and the RBA has raised rates twice in recent weeks, signalling that policymakers are reading the trajectory rather than the current headline number.
- Global share markets are pricing in a prolonged conflict, with Wall Street and Australian equities both falling sharply as investors accept that the energy disruption will outlast early expectations.
On Wednesday, Australia's statistics bureau will release February consumer price figures expected to show headline inflation easing slightly from 3.8 to 3.7 per cent. The modest improvement is largely a product of timing — fuel costs have not yet absorbed the shock flowing from conflict in the Middle East. For the Reserve Bank, which meets again in May, these figures represent a final, deceptively quiet snapshot before the real pressure arrives.
The disruption is already underway. Motorists are watching prices climb toward three dollars a litre, and economists expect a further 25 per cent surge through March. When that spike registers in the March inflation data — due before the RBA's May meeting — it will add roughly one percentage point to the annual rate, pushing it to around 4.6 per cent. The RBA's preferred trimmed mean measure will mask much of this for now, since the price surge arrived late in the quarter.
What follows March is where the complexity deepens. Airlines will begin passing higher jet fuel costs to passengers in April and May. Construction companies, logistics firms, and manufacturers are all preparing to lift prices as their energy bills climb. NAB economists predict headline inflation could peak near five per cent in the June quarter as these cascading increases move through the economy.
The RBA holds a narrow timing advantage: March inflation data arrives before the May meeting, giving policymakers a clearer view of the post-conflict trajectory before they decide on rates. Markets have already priced in another hike. Meanwhile, global share markets are absorbing the reality that the conflict will likely persist longer than first expected — Wall Street fell sharply, Australian share futures tumbled, and the ASX200 closed at its weakest level in nine months. The anxiety is not about Wednesday's data, which investors expect to look relatively benign. It is about what comes next. The real inflation shock is still in transit.
On Wednesday, Australia's statistics bureau will release the consumer price figures for February, and they will tell a story of temporary reprieve. The numbers arriving this week are expected to show headline inflation easing slightly, from 3.8 per cent to 3.7 per cent, a modest improvement driven largely by fuel costs that have not yet absorbed the shock rippling through global energy markets. For the Reserve Bank, which meets again in May, these figures will serve as a final snapshot of the economy before the real pressure arrives.
But the calm is deceptive. War in the Middle East has already begun to remake the cost structure of Australian life, and the full weight of that disruption has not yet appeared in official data. Motorists are already noticing it at the pump. Fuel prices are climbing toward three dollars a litre, and economists expect them to surge another 25 per cent through March alone. When that spike flows into the March inflation figures—due before the RBA's May meeting—the picture will shift dramatically. A single percentage point will be added to inflation from fuel alone, pushing the annual rate to around 4.6 per cent.
What happens after March is where the real complexity emerges. Airlines will begin passing higher jet fuel costs to passengers in April for domestic flights and May for international ones. Construction companies, logistics firms, agricultural operations, manufacturers, and transport providers are all preparing to lift their prices as their own energy bills climb. These cascading increases will ripple through the economy over the coming months, each sector absorbing the shock and passing it forward. The June quarter, economists at NAB predict, could see headline inflation peak near five per cent.
None of this will be visible in Wednesday's data. The February figures predate the recent surge in global energy prices, so they offer what one Commonwealth Bank economist called a final look at how prices were moving before the conflict took hold. The Reserve Bank's preferred measure of inflation—the trimmed mean, which strips out volatile items like fuel—will also mask much of the damage for now. Because the price spike arrived late in the quarter, most of its impact will only register in the June quarter figures.
Yet the RBA faces a timing advantage. The March inflation data, which will capture the first wave of fuel-driven increases, arrives before the central bank's May meeting. That gives policymakers a clearer view of the post-conflict trajectory before they decide whether to raise rates again. Money markets have already doubled down on that bet, pricing in another rate hike for May as inflation expectations climb. The bank itself moved twice in recent weeks, raising rates in response to mounting price pressures tied to the Middle East conflict.
Global markets are bracing for a prolonged disruption. Wall Street fell sharply, with the S&P 500 dropping 1.49 per cent and the Nasdaq shedding 2.01 per cent as investors absorbed the reality that the conflict will likely persist longer than initially expected. Australian share futures tumbled 1.83 per cent, and the ASX200 closed down 0.82 per cent on Friday, marking its weakest level in nine months. The anxiety is not about what Wednesday's data will show—economists and investors alike expect it to look relatively benign—but about what comes next. The real inflation shock is still in transit.
Citações Notáveis
The cost shock from the Middle East will appear first through automotive fuel prices, adding around one percentage point to March CPI and sending the year-ended rate to around 4.6 per cent— NAB senior economist Taylor Nugent
The data has been overtaken by events but remains important as the RBA refines its assessment of how inflationary domestic conditions were before the Iran shock— NAB senior economist Taylor Nugent
A Conversa do Hearth Outra perspectiva sobre a história
So Wednesday's numbers will look fine, but they're essentially lying to us about what's actually happening?
Not lying, exactly. They're just capturing a moment before the shock hit. February was still in the old world. The energy crisis started after those prices were locked in.
And the RBA knows this is coming?
They do. That's why they've already raised rates twice. They're trying to get ahead of inflation they can see coming but can't yet measure.
When will we actually see the damage in the official numbers?
March data shows the first real hit—fuel alone adds a full percentage point. But the broader stuff, airlines and construction and everything else, that's spread across April, May, June. It's not one shock, it's a wave.
So the May meeting is crucial because they'll have March data by then?
Exactly. They'll see the fuel spike confirmed, and they'll have to decide if another rate hike is necessary. Markets are betting yes.
What happens to ordinary people in the meantime?
They're already feeling it at the petrol pump. But the real squeeze comes when everything else gets more expensive—flights, building materials, groceries. That's the next few months.