00:02I might notice it quite soon even though the petrol that's in the tank underneath the station
00:08goes into the small tank in your car was actually bought in Singapore about six weeks ago those
00:14price fluctuations those expectations do fit into higher petrol prices. Iran produces only about
00:21five percent of the world's oil but the area is really strategically important for energy
00:27beyond petrol but also into liquefied natural gas. So we heard in that package there about just how
00:33much flows through the Strait of Humors which has like a little chicane in it that as it kind of
00:40squeezes between the United Arab Emirates and Iran. So already that's having an impact and it's going
00:46to have a broader impact because whilst we think of fuel as something that we use to put in our
00:51cars
00:51and in making things like plastics as an input to things like fertilizer we use to grow our food.
00:57So all of that feeds into what are going to be longer term costs that Australian consumers will
01:02feel. What might be some of the longer term impacts? Well beyond that of course we have the impact on
01:08global shipping so we're already hearing more difficult to get insurance. Ships have to use
01:14more fuel to go further to go around conflict zones. So all of those prices do get added into everything.
01:21You know for example in Australia we import every single car now about a million a year. You know lots
01:29of the things that we buy and lots of the ingredients for things that we make here you know do
01:33come from
01:33overseas. So global shipping, insurance problems, increased fuel prices, all of this kind of floats the
01:40boats essentially on costs that we can't avoid as consumers and as businesses because they'll be passed on
01:48through that global uncertainty sparked by this conflict in this very specific part of the world.
01:54And Dan how is all of this likely to affect interest rates?
01:58Well the Reserve Bank is very concerned about inflation, that is the pace of prices rising,
02:04how much they grow. They want prices to only rise between two and three percent a year,
02:08what they call their target band. But they've failed at that because all of this pressure,
02:14this inflationary pressure means that price has been rising closer to almost four percent,
02:18about 3.8 at the moment. So to try and get that inflation down the RBA uses the biggest tool
02:24that
02:25it has at its disposal which is to raise interest rates. It makes money more expensive, it takes cash
02:30out of the economy and theoretically that gives consumers less power, they trim back. A lot of the
02:36costs that are coming from this kind of conflict really can't be dealt with by consumers. They're things
02:41that are happening to them. They're not things consumers can make a decision about. They can't
02:46reduce their food cost because fertiliser costs have gone up, because petrol costs have gone up.
02:50They can only make a really small difference the amount of petrol they consume in their car to
02:55commute to their work. So all of these things consumers have very little ability to impact but
03:01they will happen to them and then probably because of that the RBA makes it more likely, not so much
03:06at
03:07their imminent meeting which is happening in two weeks from today, but more likely at the May meeting
03:13where they're more likely to increase interest rates, increase the cost of money, try and take some of
03:20that heat out of the economy even if the heat is coming from overseas rather from Australian consumers
03:25having too much money.
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