Moody's: Middle East conflict may complicate Australia's inflation outlook.

Sunny Nguyen of Moody's Analytics stated in a report that the escalating conflict in the Middle East is not happening at a good time for Australia's inflation outlook. The economist pointed out that just weeks before this conflict erupted, the Australian central bank had raised the overnight cash rate to 3.85% in response to a significant increase in inflation expected by the end of 2025. She said that as Australia is a net energy exporter, the rising global energy prices could boost the country's export and government revenue, but these gains are typically front-loaded and unevenly distributed. She added that the increasing energy costs could also lead to a demand for higher wages, potentially exacerbating service sector inflation. A tight labor market and active wage negotiations could solidify this dynamic. She said, "An indefinite energy shock is the last thing the Australian central bank wants to see."