The economic impact of Russia’s invasion of Ukraine on the rest of the world is starting to become the talk of the nations.
Russia is one of the largest natural resource suppliers, exporting 10% of global oil, 20% of global gas and 20% of global thermal coal. Even before the Russia-Ukraine crisis, these commodity prices were already elevated in the context of the pandemic, but premiums are set to increase even more with the new sanctions in place.
Peter Khoury, spokesperson for NRMA, said the general demand for oil has continued to increase as the world economy started to open up again, but supply has not kept up. This will impact not just the delivery of goods and services, but also farming and agriculture across Australia.
“The Australian economy runs on diesel,” Khoury told Daily Mail. “The impact is going to be significant.”
Although Russia and Australia have limited economic ties, inflation could put more pressure on increasing household bills, resulting in a rise in interest rates and mortgage repayments.
News.com.au believes that overseas central banks will be forced to lift interest rates to counter inflation if Russia continues to act aggressively. Compared to other developed economies, Australia does not have the same inflation problem for now, but prolonged tension in Russia could entice the Reserve Bank of Australia (RBA) to follow suit.
Years of near-zero inflation have interest rates at record lows, which pushed a boom in properties with large mortgage arrangements. However, if the invasion escalates, Australia’s property market could significantly slow down.
“However, global rate hikes would pressure bank margins and they may well raise mortgage rates ‘out of cycle.’ It may not be much comfort to know that this will make the RBA even more patient,” News.com.au reported. “The most important outcome is that the worse Ukraine gets, the more global energy prices will probably rise, with each intensification deepening the damage to households.”
