Australian growth forecasts slashed as global economy faces inflation spike

The OECD has sharply revised down global growth forecasts amid a looming inflation spike driven by soaring oil prices linked to the US-Israel conflict with Iran and disruptions around the Strait of Hormuz. Inflation across G20 countries is now expected to average 4% in 2026, up 1.2 percentage points from prior forecasts. The international crude oil price has surged 70% year-to-date, trading around $104 per barrel, exerting significant pressure on inflation expectations and growth prospects globally. For Australia, economists at ANZ and Deloitte have cut growth forecasts substantially due to rising oil prices and tighter monetary policy. ANZ now forecasts 1.3% GDP growth this year, down 0.5 percentage points from February’s outlook, with inflation reaching 4.9% by June and staying elevated near 4.5% by year-end. While households have some buffers from elevated savings, rising living costs and inflation pressures are expected to constrain economic momentum into 2027. The market implications include heightened volatility in energy and precious metals markets as inflation pressures persist. Sustained oil supply disruptions pose upside risks to energy prices that could drive further gold demand as an inflation hedge. Key risks include the potential for prolonged instability in Middle East oil flows and the trajectory of central bank responses to surging inflation. Near-term catalysts include geopolitical developments in the Gulf and inflation data releases in coming months. Against the backdrop of AI-driven growth hopes fading due to the energy shock, analysts emphasize a cautious stance for commodity-linked assets. The new inflation regime and growth uncertainty are reinforcing gold’s role as a safe haven amid shifting monetary policy and elevated geopolitical risks.