WEBVTT - How the Iran / U.S. conflict could hit your wallet

0:00:00.120 --> 0:00:02.320
<v Speaker 1>With the later situation that's going on. We knew it

0:00:02.360 --> 0:00:04.560
<v Speaker 1>was going to affect the cost of petrol. Where are

0:00:04.559 --> 0:00:05.080
<v Speaker 1>we at with this?

0:00:06.440 --> 0:00:09.239
<v Speaker 2>So oil prices have literally collapse back to where they

0:00:09.240 --> 0:00:14.080
<v Speaker 2>were before Israel started in Iran, and that of course

0:00:14.080 --> 0:00:16.239
<v Speaker 2>I saw that seen the sher market bounced back by

0:00:16.239 --> 0:00:19.319
<v Speaker 2>about one percent, similar to one percent bounce back in

0:00:19.360 --> 0:00:19.880
<v Speaker 2>the US.

0:00:20.200 --> 0:00:21.280
<v Speaker 1>So that's good news.

0:00:21.360 --> 0:00:24.320
<v Speaker 2>It's removed the threat of higher petrol prices in Australia

0:00:24.360 --> 0:00:26.560
<v Speaker 2>for now. Of course, the issue is whether the sea

0:00:26.600 --> 0:00:30.120
<v Speaker 2>is fiabile stick and whether we'll see the issues creeping

0:00:30.160 --> 0:00:32.360
<v Speaker 2>back up again. And that's always been the big fee

0:00:32.400 --> 0:00:37.760
<v Speaker 2>here that Iran might retaliate by blocking shipping oil shipping

0:00:37.880 --> 0:00:42.159
<v Speaker 2>through the straight offor moves which goes Pleasuan Golf basically

0:00:42.240 --> 0:00:44.640
<v Speaker 2>into the Gulf of Oman and then all goes out

0:00:44.640 --> 0:00:46.639
<v Speaker 2>of the world. So if they do that, then they

0:00:46.680 --> 0:00:50.320
<v Speaker 2>would disrupt about twenty percent of oil supplies, which could

0:00:50.600 --> 0:00:55.880
<v Speaker 2>push oil prices sky high, possibly above one hundred dollars,

0:00:55.920 --> 0:00:58.960
<v Speaker 2>maybe one hundred and fifty dollars, pushing our petrol prices

0:00:59.040 --> 0:01:02.600
<v Speaker 2>up above two dollars a leter. Fortunately that's been avoided,

0:01:02.640 --> 0:01:04.160
<v Speaker 2>but obviously that risk is still there.

0:01:04.280 --> 0:01:06.280
<v Speaker 1>So once the knock on effect, then if that happens.

0:01:06.440 --> 0:01:09.560
<v Speaker 2>Look if we had that worst case scenario, then I

0:01:09.600 --> 0:01:11.160
<v Speaker 2>think yes, there would be a knock on effect.

0:01:11.200 --> 0:01:12.640
<v Speaker 1>Obviously inflation would.

0:01:12.400 --> 0:01:15.360
<v Speaker 2>Get a boost from the higher petrol prices, but it

0:01:15.400 --> 0:01:18.160
<v Speaker 2>would be the headline motion rates, so the RBA wouldn't

0:01:18.240 --> 0:01:21.319
<v Speaker 2>necessarily raise interest rates on the back of it. They'll

0:01:21.360 --> 0:01:26.160
<v Speaker 2>focus on the underlying measures of inflation. I think that

0:01:26.319 --> 0:01:28.440
<v Speaker 2>it may cause them if it occurred, it would cause

0:01:28.440 --> 0:01:31.199
<v Speaker 2>them to delay interest rate cuts, but I think ultimately

0:01:31.280 --> 0:01:33.760
<v Speaker 2>the Reserve would probably say, well, if people have got

0:01:33.800 --> 0:01:36.640
<v Speaker 2>to pay two dollars or more a leter for petrol,

0:01:36.959 --> 0:01:40.160
<v Speaker 2>that chops into household spending power because it means people

0:01:40.240 --> 0:01:44.080
<v Speaker 2>have less money to spend in the shops in Australia,

0:01:44.480 --> 0:01:47.199
<v Speaker 2>So they ultimately, I think, would still cut interest rates,

0:01:47.240 --> 0:01:48.920
<v Speaker 2>but it may be delayed a little bit.

0:01:49.440 --> 0:01:51.760
<v Speaker 1>But hopefully we don't go down that path and your

0:01:51.840 --> 0:01:53.320
<v Speaker 1>market now settles down again.

0:01:54.880 --> 0:01:58.080
<v Speaker 2>And if that's the case, then I think we're still

0:01:58.120 --> 0:02:00.240
<v Speaker 2>on track for a rate cut from the Reserve the

0:02:00.280 --> 0:02:02.080
<v Speaker 2>Reserve Bank at the July meeting.

0:02:02.560 --> 0:02:04.960
<v Speaker 1>Of course, in the next day.

0:02:04.880 --> 0:02:08.320
<v Speaker 2>In the day ahead, we'll get another another CPI reading,

0:02:08.360 --> 0:02:11.720
<v Speaker 2>so that will impact things, But so far it seems

0:02:11.720 --> 0:02:14.480
<v Speaker 2>as if the worst case scenario on petrol prices has

0:02:14.560 --> 0:02:19.160
<v Speaker 2>been averted, which means the Reserve Bank probably still on

0:02:19.240 --> 0:02:20.840
<v Speaker 2>track for a cut in July.

0:02:21.120 --> 0:02:23.520
<v Speaker 1>Did that surprise you how quickly things bounce back?

0:02:23.680 --> 0:02:26.400
<v Speaker 2>It certainly surprised me how quickly the situation in the

0:02:26.400 --> 0:02:30.760
<v Speaker 2>Middle East is settled down, although history tells me that

0:02:30.840 --> 0:02:33.960
<v Speaker 2>it's not that unusual. The First and second Golf Wars

0:02:34.919 --> 0:02:40.560
<v Speaker 2>when the US and others attacked Iraq. In the first one,

0:02:40.639 --> 0:02:45.160
<v Speaker 2>Iraq had invaded Q what mad and disrupted oil supplies,

0:02:45.280 --> 0:02:46.880
<v Speaker 2>leading to a lot of uncertainty at the end of

0:02:47.000 --> 0:02:51.760
<v Speaker 2>nineteen ninety, and the second one was when the US

0:02:51.919 --> 0:02:55.520
<v Speaker 2>attacked Iraq seeking regime change on the basis that there

0:02:55.600 --> 0:02:58.640
<v Speaker 2>might be weapons of mass destruction in Iraq. Interestingly, ahead

0:02:58.680 --> 0:03:02.079
<v Speaker 2>of both of those events, prices rose lots of uncertainty,

0:03:02.160 --> 0:03:04.800
<v Speaker 2>just like we've seen recently, But as soon as the

0:03:04.880 --> 0:03:08.040
<v Speaker 2>US got involved, the old price collapsed and share markets

0:03:08.080 --> 0:03:11.800
<v Speaker 2>took off again. Maybe we're seeing history repeat, maybe on

0:03:11.840 --> 0:03:17.320
<v Speaker 2>a smaller scale because there's been no disruption to oil supplies,

0:03:17.360 --> 0:03:20.160
<v Speaker 2>but it is similar to what we've seen in the past.

0:03:20.200 --> 0:03:23.880
<v Speaker 2>Once the US gets involved with missiles and things, it

0:03:23.919 --> 0:03:26.799
<v Speaker 2>seems to settle down. Of course, there's a long term

0:03:26.800 --> 0:03:31.120
<v Speaker 2>issue as well here. This situation may have further disabilized

0:03:31.120 --> 0:03:31.960
<v Speaker 2>things in the Middle East.

0:03:32.000 --> 0:03:34.440
<v Speaker 1>That's the negative take on things.

0:03:34.480 --> 0:03:37.560
<v Speaker 2>That Iran may not be too happy what happened, and

0:03:37.600 --> 0:03:39.800
<v Speaker 2>that can lead to further issues down the track. But

0:03:39.840 --> 0:03:43.440
<v Speaker 2>for now, what we've seen is consistent with what happened

0:03:43.480 --> 0:03:46.720
<v Speaker 2>back in nineteen ninety one with the First Golf War

0:03:46.880 --> 0:03:49.080
<v Speaker 2>and the Second World War in two thousand and three.

0:03:49.200 --> 0:03:52.360
<v Speaker 1>If we see another military escalation, how quickly will that

0:03:52.400 --> 0:03:53.440
<v Speaker 1>affect the prices?

0:03:53.920 --> 0:03:57.720
<v Speaker 2>I think if you see another military escalation, suppose Iran

0:03:57.920 --> 0:04:01.760
<v Speaker 2>is just biding its time here, just regroups, and then

0:04:02.280 --> 0:04:04.480
<v Speaker 2>in a few weeks time there's an attack on ships

0:04:04.480 --> 0:04:07.880
<v Speaker 2>through the Middle that the Gulf of the straight upfor moves.

0:04:07.960 --> 0:04:11.920
<v Speaker 2>Rather that I think would quickly see all prices spiked

0:04:11.960 --> 0:04:14.520
<v Speaker 2>back up, because the whole equation would change. So far,

0:04:14.600 --> 0:04:17.760
<v Speaker 2>financial markets oil markets are thinking, well, there hasn't acted

0:04:17.800 --> 0:04:20.080
<v Speaker 2>spottle the noise. There hasn't actually been a disruption to

0:04:20.120 --> 0:04:23.040
<v Speaker 2>oil supplies. Now the threat is receiding. If that threat

0:04:23.120 --> 0:04:26.360
<v Speaker 2>quickly came back and there was an actual attack disrupting

0:04:26.400 --> 0:04:29.000
<v Speaker 2>oil supplies, then I think you'd see a quick spike

0:04:29.120 --> 0:04:32.839
<v Speaker 2>higher in oil prices and share markets would have a

0:04:32.880 --> 0:04:34.640
<v Speaker 2>fairly significant fall on the back of that.

0:04:35.560 --> 0:04:38.240
<v Speaker 1>But that would require some concrete action.

0:04:38.160 --> 0:04:42.400
<v Speaker 2>By Iran to disrupt the flow of oil after the

0:04:42.400 --> 0:04:45.640
<v Speaker 2>rest of the world coming from the Middle East. So

0:04:45.760 --> 0:04:47.520
<v Speaker 2>far we haven't seen that, but if that did happen,

0:04:47.520 --> 0:04:49.680
<v Speaker 2>then it would cause a big scare in markets.