Australia’s Chalmers blames US-Iran war for higher inflation, borrowing costs

Australian Treasurer Jim Chalmers has linked the U.S.-Iran conflict to higher inflation and borrowing costs, warning that it is hampering global growth. Speaking on ABC News' Insiders program, Chalmers stated that the Middle East war has been an economic disaster, regardless of the motivations behind it. He acknowledged that the conflict's repercussions are being felt by Australians and consumers worldwide, as increased costs linked to the war contribute to upward pressure on inflation and subsequently, higher global interest rates.

Chalmers did not offer advice on whether President Donald Trump should end the war but emphasized that an end to the conflict is urgently needed. This comes after Australia's central bank raised interest rates to a 15-year high to curb inflation, attributing the surge to energy price hikes stemming from the Middle East conflict and domestic capacity constraints.

Chalmers dismissed claims that government spending is the main driver of inflation, asserting that spending growth has been slowing. He warned of potential billions in additional debt-servicing costs due to rising global bond yields and the uncertain impact on Australia's fiscal position. While not anticipating a recession, Chalmers cautioned that weaker global growth resulting from the conflict would also impact the domestic economy.

On a separate note, Chalmers announced a trip to Japan on Sunday to meet with Finance Minister Satsuki Katayama, business leaders, and investors to discuss challenges including higher energy prices, bond yields, and efforts to boost investment, enhance fuel security, and improve economic resilience between Australia and Japan.