Australian households are already tightening their belts in response to the Middle East conflict, even as equity markets remain relatively upbeat.
Ray White Group chief economist Nerida Conisbee (pictured) notes that “The economic impact of the Middle East conflict is already visible in real time,” with high-frequency indicators flashing warning signs well before official data catches up.
Westpac chief economist Luci Ellis similarly warns against “fighting the last war”, arguing this fuel shock is very different from COVID or Russia’s invasion of Ukraine and will require a more calibrated policy response.
Consumer confidence has slumped, with the ANZ–Roy Morgan index tumbling to a record low of 63.1 after a 17‑point fall in four weeks. Inflation expectations have jumped to about 6.9%, as higher fuel costs and broader price pressures filter rapidly into household budgets and perceived borrowing capacity.
Headline CPI was already at 3.7% in February, with trimmed mean inflation steady at 3.3%, suggesting underlying price pressures were only marginally softer than expected before the latest fuel surge.
Against that backdrop, the combination raises the risk of more cautious borrowing behaviour, longer decision cycles, and heightened sensitivity to mortgage rates for brokers and their clients.
Early housing indicators are pointing to softer demand. Ray White inspection data show national attendee numbers are down around 1.1% year-on-year. In Sydney and Melbourne, inspections are averaging about 1.9 attendees per property.
Conisbee stresses that “This does not indicate a collapse in demand, but it does suggest that buyers are becoming more cautious.”
Ellis also points out that, for Australia, this episode is “mostly an issue of fuel prices and availability, rather than electricity”, which means the household hit will be concentrated around transport and logistics rather than power bills.
Spending slows, labour signals diverge, markets hold their nerve
Real-time spending data from major banks already showed a loss of momentum before the conflict escalated.
Overall consumer spending edged higher in February, but travel outlays fell for a third straight month, and discretionary spending was flat, pointing to an emerging pullback.
Business confidence has slipped into negative territory, even as current conditions remain reasonably steady, suggesting corporate clients are becoming more wary about hiring and investment.
The labour market picture is mixed, with one leading job ad series rising and another edging lower, implying conditions are firm but no longer tightening uniformly. Meanwhile, equity markets have swung sharply but remain higher than a year ago, indicating investors are still treating the disruption as short-lived.
Much hinges on how long energy supply is constrained via the Strait of Hormuz; some tankers are already being allowed through, but economists warn that any lasting damage to Gulf production or infrastructure could turn a temporary fuel shortage into a more persistent inflation problem.
As Conisbee puts it, “These indicators provide an early read on behaviour across the economy,” suggesting that while headline data may still look stable, brokers should prepare for more cautious borrower behaviour in coming months.
With markets still pricing a relatively contained shock, Ellis argues the appropriate monetary policy stance for now is to “wait and see”, with no out-of-cycle Reserve Bank move expected – giving borrowers a short window of relative rate stability even as the medium-term outlook remains uncertain.
For more insights, read the Ray White and Westpac analysis as well as the Cliff Notes.
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