The Reserve Bank of Australia has warned Russia’s war in Ukraine has created additional uncertainty about the global outlook and could result in lower growth and higher inflation.
In its minutes from its March 1 meeting, RBA board members acknowledged the economic implications of the war depended on the scale and duration of the conflict and the nature of any second-round effects.
“Members recognised that the war in Ukraine would pose a significant setback for the recovery in Europe, particularly through the effects of disruptions to energy supply and higher energy prices,” the minutes said.
“It was noted that European gas imports are mostly sourced from Russia, and natural gas prices in Europe had surged. While some gas exports could be redirected from the United States and the Middle East to Europe, this would take time; moreover, capacity constraints and the long-term nature of many gas contracts meant there were limits to the extent to which energy sources could be diverted to Europe.”
The RBA also noted the impacts would be distributed unevenly across economies.
“The energy intensity of many economies had fallen substantially over recent decades, and this would cushion the effects of the energy price shock compared with the 1970s,” the minutes said.
“Even so, the net effect would be lower global output than otherwise. At the same time, further disruptions to global supply chains would lead to higher global inflation in the period ahead.
“Members noted that, prior to the invasion of Ukraine, developments in international supply chains had been mixed; supply chains for some goods remained strained or had deteriorated further amid ongoing strong demand, while conditions had eased in other areas.
“Members acknowledged that it would take time for supply issues in the global economy to be resolved. The war in Ukraine was adding to these challenges.”
Be the first to comment