Michael Janda

And they probably were going to do so a second time at some point.

regardless to get those domestic inflation pressures back under control.

What's been added to that is these global inflation pressures, which seem to have added urgency for the Reserve Bank to try and get ahead of the game.

And again, as I said, they look very much like they're leaning over the precipice and away from the fire of inflation.

They'd rather take the risk of driving the economy into recession sooner and maybe having a mild, shallow recession

to get inflation under control, then the risk of letting inflation

go on, they seem to lose control and potentially falling into stagflation or a much deeper recession further down the track.

So it's this approach of a stitch in time saves nine.

Now, they're obviously hoping that their baseline forecasts are right and that Australia doesn't fall into recession, but it's really out of their hands because as they acknowledge in their forecasts, if the strait stays closed for months more, there is a really significant chance

that Australia could have a couple of quarters of negative growth, which would be the technical definition of a recession.

And as the RBA forecasts point out, even if it does end tomorrow, and many analysts have said this, there are months more of disruptions baked in.

So in a best-case scenario, we're looking at oil and energy supplies getting to somewhere approaching normal by...

September, October at the very earliest, even if everything's resolved straight away.

The adverse scenario that the Reserve Bank has modeled is everything not getting back to normal until at some point early next year.

And if that's the case, then they're expecting annual growth could be below half a percent, which is borderline if not in recession, because to avoid two negative quarters consecutive when your annual growth is only half a percent is pure luck.

So basically the adverse scenario has Australia on the borderline of a recession, unemployment above 5%, and it's a very realistic possibility if this doesn't get sorted out.

Yeah, so there's the less bad one for the economy, which is almost worse for inflation, where people kind of carry on regardless, despite the reduced energy supply.

And it's worth pointing out that in neither scenario does the Reserve Bank factor in any possibility of rationing of fuel.

So they're assuming that we have to pay higher prices but we can still get all the fuel that we need as long as we're willing to pay.

That would be much worse because that would just automatically take some of GDP out because there will be certain activities that we physically cannot do because we do not have enough fuel.