Australia Risks Sharp Recession in Prolonged Iran War

Oxford Economics warns Australia could face its sharpest recession since the early 1990s (outside the pandemic) if the Iran war extends and continues to disrupt supply chains. The conditional scenario, presented by Australia economist Harry McAuley on Bloomberg, elevates downside risk to growth via trade and energy-price shocks and would materially worsen prospects for GDP, inflation and asset returns in Australia. Monitor supply-chain disruption, energy price moves and export channels as triggers that could force sharper policy trade-offs for the RBA and trigger broader market risk-off moves.

Analysis

Oxford Economics warns Australia could face its sharpest recession since the early 1990s (outside the pandemic) if the Iran war extends and continues to disrupt supply chains. The conditional scenario, presented by Australia economist Harry McAuley on Bloomberg, elevates downside risk to growth via trade and energy-price shocks and would materially worsen prospects for GDP, inflation and asset returns in Australia. Monitor supply-chain disruption, energy price moves and export channels as triggers that could force sharper policy trade-offs for the RBA and trigger broader market risk-off moves.