The price of certainty in a world run by chaos
What do war, surging oil, and stubborn inflation tell us about Australia’s economic heartbeat—and about how we should live with risk going forward? Personally, I think they reveal a truth our policy makers keep forgetting: economies don’t march to a single number called “inflation,” they breathe through a tangle of headlines, supply shocks, and human nerves. When oil rockets, when war unsettles global demand, and when households feel the pinch in their day-to-day budgets, policy responses that feel precise—like a neat set of interest-rate steps—can actually amplify uncertainty and slow the wrong things at the wrong time. What makes this particularly fascinating is how fragile the equilibrium has become between price stability and real-world livelihoods, and how fragile that balance really is.
A new risk has quietly entered the room: the holy trinity of high oil prices, geopolitical fragility, and stubborn domestic inflation. The RBA, staring at a world where Brent crude has flirted with record highs, is pulled toward the old reflex—raise rates to crush inflation. The temptation is powerful, because inflation appears to be the loudest voice in the room. But inflation is not a monolith; it’s a chorus with supply disruptions, energy price spikes, and demand-side resilience all singing at once. If the central bank acts too aggressively, it risks turning a suspected inflation threat into a full-blown growth crisis. If it hesitates, inflation can embed itself, widening the pain that comes with high prices and slower growth. From my perspective, the dilemma isn’t merely about a degree on a chart; it’s about managing a fragile social contract in which households expect prices to remain stable while wages and job security keep pace.
Oil shocks aren’t just about the price tag at the pump; they are a diagnostic of global risk. When Wood Mackenzie warns that Brent could surge toward US$150 or even US$200 a barrel, the implication isn’t merely higher gasoline bills. It’s a signal of a world where energy becomes a visible bottleneck that drags on investment, consumer confidence, and long-term planning. What this really suggests is a recalibration of the economic operating system: energy costs become a decentralized tax that hits every sector, from manufacturing to services, and from peer-to-peer hiring platforms to regional economies that can’t easily wean themselves off fossil fuels. What many people don’t realize is that even if the war cools eventually, the market’s memory of scarcity can linger, influencing business risk assessments for years to come. If you take a step back and think about it, the era of cheap, predictable energy seems bound to fade into a more volatile landscape where policies, geopolitics, and market psychology intertwine.
In the debate inside Australian policy circles, there is a consistent drumbeat: higher rates will tame inflation. The problem, as highlighted by Hauser and echoed by analysts, is that this logic rests on fragile assumptions about the pass-through of monetary policy to real-world prices, and about the speed with which demand will respond. What this raises is a deeper question: to what extent can a central bank steer inflation when a significant portion of price pressures is imported via energy and global supply chains? In my view, the answer is: not as much as traditional models would like us to believe. If you push rates up quickly while energy prices are in flux and geopolitical risk remains elevated, you risk throttling economic activity without delivering reliable relief on petrol and energy bills. This is not a minor tension; it’s a structural misalignment between policy tools and the sources of the problem.
The data offers a nuanced picture. Household spending has cooled, but not collapsed, which suggests consumer balance sheets aren’t yet screaming for a policy reversal. The Commonwealth Bank’s February read shows a dip across utilities, hospitality, and even big-ticket items like cars. That’s a reminder that the consumer is sensitive to both price levels and financial conditions, and that sentiment can turn quickly if policy becomes too aggressive. The risk is that the RBA might overshoot, creating unemployment and business closures just as inflation pressures begin to subside for reasons outside its control. In my opinion, this is where caution becomes a virtue: slow, measured tightening that respects the unpredictable arc of energy prices, rather than a bold, headline-grabbing march to “neutral” or beyond.
There’s a broader societalAngle to consider. Energy volatility disproportionately hurts lower- and middle-income households, who spend a larger share of income on transport and energy. If policy leans too hard into rate hikes, we may see a heavier distributional impact—more households squeezed as the cost of living rises and jobs become less secure. What makes this particularly important is that it forces policymakers to weigh equity alongside macro stabilization. From my standpoint, a sharper policy focus on energy affordability—through targeted support or fuel-price relief mechanisms—could complement macro levers, reducing the risk of a hard landing while still keeping inflation contained.
The “what’s next” question is less about a single data point than about a terrain shift. If oil stays near elevated levels, and if the Middle East conflict remains unsettled, the downside risks aren’t a brief blip but a sustained pressure that could recalibrate investment, hiring, and consumer behavior for years. This is not scaremongering; it’s a sober forecast that suggests central banks may need to decouple inflation management from the illusion that prices will self-correct just by tightening financial conditions. In other words, monetary policy alone won’t restore equilibrium when the energy market and geopolitics are driving a large portion of the price changes. That’s a reality worth acknowledging in boardrooms, in government, and in living rooms across the country.
The most provocative takeaway, perhaps, is this: growth and inflation can coexist in a dangerous grip, and policy has to navigate that grip without snapping the chain. If the RBA acts with “shock and awe” in rate increases, we risk a self-inflicted wound—one that worsens unemployment, slows investment, and makes households more vulnerable to energy price shocks that policy cannot control. If it hurries, it may delay the normalization of inflation only to face a stubborn, high-cost energy environment that keeps prices elevated anyway. The middle path—gradual tightening, targeted support for energy-heavy households, and clear communication about uncertainty—seems not just prudent but necessary in a world where oil prices can swing wildly on the globe’s geopolitical stage.
Ultimately, the question is about resilience. What kind of economy do we want to live in when oil costs are a geopolitical variable rather than a domestic certainty? My answer: a resilient economy is one that plans for uncertainty, not one that pretends it isn’t there. That means policy that preserves employment, safeguards household budgets, and acknowledges energy volatility as a core risk rather than an afterthought. It also means public discourse that moves beyond the binary of “rates up” or “rates down” and toward a more nuanced conversation about how to shield everyday life from the storms of geopolitics and energy markets. If there’s one thing I’m confident about, it’s this: in times of high uncertainty, credibility isn’t just about keeping inflation in a target range; it’s about showing the public that the system can respond intelligently when the equations fail to predict the next shock.
So where does that leave us? It leaves us with tough choices, a more complex narrative, and a belief that ordinary Australians deserve a policy approach that respects the reality of energy prices as a global variable, not a local afterthought. It’s not about defeating inflation in a vacuum; it’s about maintaining livelihoods while we navigate a world where the price of oil, the risk of conflict, and the stubbornness of inflation all push against the same boundary: what ordinary people can pay, today and tomorrow.
