Company Interview / Shane's View: Petrol prices making us gloomy

The rise in petrol prices and all the talk of higher inflation has seen consumer inflation expectations spike to 5.9%, its highest since 2022. So far wage growth expectations have not picked up but the ACTU is calling for a 5% rise in minimum and award wages and is likely to revise it higher so the risks to wages growth are skewed to the upside. This will worry the RBA as it raises the risk higher cost and price pressures will become more entrenched. The impact of the surge in energy and other costs associated with the War is also evident with the NAB survey showing a surge in purchase costs and final product prices. This will add to RBA concerns, particularly as the price and cost indicators in the NAB survey had been heading in the right direction.However, the Iran War has also hit consumer and business confidence very hard. The Westpac/Melbourne Institute’s consumer confidence index plunged 12% in April taking it back to around pandemic and 2022 rate hike lows with the decline being broad based across components and across mortgage holders, outright homeowners and tenants. Consumers are also now expecting a sharp rise in unemployment. The alternative ANZ/Roy Morgan index is even weaker at record lows. While the link is not always reliable, the plunge in consumer confidence if sustained is warning of weakness in consumer spending ahead.While the latest NAB business survey showed okay business conditions, business confidence also plunged with worries regarding the impact of the War. So, it’s a hard balancing act for the RBA!