Diesel prices are now pushing toward $3 per litre across parts of Australia, and the impact is starting to move beyond the bowser. Transport costs are rising quickly, and businesses are beginning to pass those increases directly onto consumers.
From food and groceries through to construction and logistics, diesel sits behind much of the country’s supply chain. As those costs climb, the flow-on effect is becoming harder to absorb, with price increases now showing up more clearly in everyday spending.
At the same time, the Reserve Bank of Australia has continued to urge households to show restraint following recent rate rises. The message is clear, spending needs to slow to help bring inflation under control.
The challenge is that many Australians are already doing exactly that. Higher mortgage repayments are reducing disposable income, while rising fuel and transport costs are pushing the price of essentials higher. For many households, there is little room left to cut back further.
This combination is bringing inflation back into focus, just as it appeared to be easing. But alongside it, a second concern is starting to emerge, the risk of slower economic growth.
Gold and silver are reflecting this shift. Both metals have slipped below their 50-day moving averages following a weaker week, but are still holding comfortably above their longer-term trend. After recent selling pressure, prices now appear to be stabilising, suggesting the market may be finding a base.
Markets are now watching closely as these forces begin to move together. Rising costs on one side, and weakening consumer activity on the other, create a more difficult environment for both policymakers and investors.
It’s a shift that could shape the next phase of the economic cycle, particularly if energy-related costs remain elevated in the months ahead.
Stagflation is a rare economic situation where inflation stays high while economic growth slows down.
Normally, inflation rises when the economy is strong and people are spending. But in a stagflation environment, prices continue to increase even as households cut back and businesses see weaker demand.
This creates a difficult balance. Central banks may want to raise interest rates to control inflation, but doing so can slow the economy even further.
For everyday Australians, stagflation can feel like the worst of both worlds, the cost of living keeps rising, while income growth and job opportunities begin to stall.
