Will Putin jack up prices and hit your back pocket?

Vladimir Putin is not only threatening the people of Ukraine, he is about to hit the real incomes of all Australians, which fall when inflation rises. And war drives gas prices up, so transportation costs skyrocket, which will eventually drive up inflation.

Economists say that what you earn in your salary is your nominal or monetary income, but what your salary buys is your real income. As inflation increases, you can buy less, so your real income decreases. And Putin and his war drive up the prices of gasoline, resources and food, so he threatens your standard of living and/or that of your family.

It is also driving up the stock prices of companies like Woodside Petroleum, BHP and Graincorp while beginning to hurt related travel and tourism businesses as fewer people are interested in traveling to Europe for war and post-war reasons. pandemic.

Webjet one month

Webjet’s share price is down 4.7% in a month, while Qantas is down 9%. They could easily go down today if we talk about the West’s physical involvement in the war. On the other hand, Woodside is up 17.4% and expected to go higher today.

These clear winners and losers will affect inflation in opposite directions, as lower demand for flights will translate into lower prices to attract customers. But the biggest effect on prices will come from soaring oil prices.

the FRG warns online shoppers and e-commerce businesses against rising shipping costs, after Australia Post imposed record fuel surcharge of 3.1% for April, up from 2.3% this month due to soaring gasoline prices.

The surcharge is driven by the national average gasoline price, and with Brent crude nearing $120 a barrel (up about 40% this year), shipping costs must skyrocket.

The RBA has warned of rising inflation. Interestingly, this should lead to more pressure to raise interest rates, but due to uncertainty about what the war might do for demand, the US Federal Reserve and our RBA have hinted that behavior Putin could slow planned interest rate hikes.

It will all depend on how long the war lasts and whether the West actually gets involved in a real sense of combat. And then how Putin, and even perhaps China, reacts.

Chinese Premier Li Keqiang said the country’s external environment was becoming “volatile, serious and uncertain”. China’s economy has suffered from anti-COVID-19 measures and the clampdown on housing debt. It is a country that needs a booming global economy, but its ally, Russia, threatens it, despite its expansionist desires directed against Taiwan.

Over the weekend, in a report to the country’s legislature, Li Keqiang said China would aim for growth “around 5.5%” this year. “Achieving this goal will require arduous efforts.”

Last year, China was aiming for 8.1% economic growth, so this Putin problem is not timely for the world’s second-largest economy.

And after two years of Coronavirus, the world economy needed this Ukraine war as a hole in the head.

Locally, our economy is poised for a year of strong growth, as the National Australia Bank-Seek jobs report suggests. It showed job vacancies rose 2.2% in February after rising 5% in January, and the job market is expected to remain tight. “Job postings reached a new record high during the month and are now 57.8% above pre-pandemic levels,” said NAB economist Taylor Nugent. FRG.

A tight labor market with unions and individual workers pushing for higher wages with hundreds of thousands of temporary foreign workers still absent from the labor force, and soaring gasoline prices, means inflation is about to undermine the purchasing power of employees’ wages and business owners’ profits.

The longer this war lasts, the greater the inflationary threat will be to our real incomes, the strength of the economy and the jobs created.

Pressure will be put on central banks to adjust their interest rate policy, otherwise they could create a Putin-inspired recession!

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