The tragic developments in Ukraine are dominating the attention of the world and markets. Russia formally invaded Ukraine on Thursday, with President Putin ordering a ‘special military operation’ in the country. Missile strikes have been carried out across the country. It is not clear how far Russia will go. Some have raised the concern that Russia’s invasion could result in a broader conflict.
This conflict comes at a time when major central banks around the world, including our own Reserve Bank, are grappling with mounting inflationary pressures while their respective economies recover from the pandemic. This conflict adds to the challenges of an already difficult inflation backdrop. It raises the risk of higher inflation, especially via higher energy prices. It also poses downside risks to consumer sentiment and world economic growth; the extent of downside risk to world growth depends on how this conflict evolves. In particular, if it draws the world into a wider conflict, there would be more severe economic ramifications. It means stagflation risks have grown, which is the scenario of low growth and high inflation.
What does it mean for the Australian economy specifically?
Download – 28 February 2022 Weekly economic outlook
This document has been created by Westpac Financial Services Limited (ABN 20 000 241 127, AFSL 233716). It provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information has been prepared without taking account of your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. Projections given above are predicative in character. Whilst every effort has been taken to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not consider known or unknown risks and uncertainties. The results ultimately achieved may differ materially from these projections. This document may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, Westpac Financial Services Limited does not accept any responsibility for the accuracy or completeness of or endorses any such material. Except where contrary to law, Westpac Financial Services Limited intends by this notice to exclude liability for this material. Information current as at 10 December 2021. © Westpac Financial Services Limited 2021.