RBA Interest Rate Hike Expected as Oil Prices Surge

The financial markets and many experts now think the RBA will increase interest rates in August.

This is because oil prices have gone above $US100 a barrel and inflation is still a problem.

The increase in oil prices has caused Wall Street to go down, and people are worried about big tech companies spending a lot on AI.

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The ASX has fallen in early morning trade, down by 0.5% as of 10:30 AEST.

Energy stocks such as Karoon, Woodside, and Santos have performed well today, with the sector higher overall by 1.5%.

Tech stocks have fallen by 1.9%, tracking moves by the US overnight.

Gold miners and resources are also lower, with spot gold prices falling by about 2 per cent.

We will have more updates on the market and economy throughout the day.

The oil price surge has sent Wall Street lower, with renewed doubts about whether massive AI spending would deliver returns adding to the sell-off.

The current market expectation is a 0.9% gain in quarterly trimmed mean inflation, which would leave the RBA’s August decision line ball.

My call is that trimmed mean quarterly inflation will hit 1%, reflecting ongoing persistent strength in market service prices and new house prices and residential rents.

There will also be an element of pass through of higher energy costs more broadly through an array of CPI items.

Based on my forecasts of a 1% gain in quarterly trimmed mean inflation, my call is that the RBA will now likely raise rates at the August policy meeting.

This would place further downward pressure on economic growth and established house prices.

The Australian share market has begun its day down 0.66%, as higher oil prices amid escalating hostilities between US and Iran trigger a pullback in stocks.

The ASX 200 has fallen 0.66% to 8,780 points by about 10:10am AEST.

Surging oil prices weighed on stocks, as fresh concerns about AI spending also rattled investors.

Alphabet fell 7.1% after lifting its capital spending forecast for the year, while Tesla sank 15% after its free cash flow turned negative in the second quarter.

Those declines helped drag the Nasdaq down 2.2%.

The Dow Jones Industrial Average lost 507 points, or 1%, while the S&P 500 fell 1.2%.

Investors also got a fresh look at another major AI chip giant, with Intel reporting results after the closing bell.

The company’s turnaround effort showed further signs of progress, with second-quarter earnings coming in well above market expectations.

Intel also issued a stronger-than-expected revenue outlook for the current period, suggesting the boom in data-centre spending is helping drive its recovery.

We are continuing to track the latest from the Origin Energy data breach.

Cyber experts this morning are warning personal information stolen in the Origin Energy data breach could be used for highly targeted scams, with AI making it easier to impersonate victims.

The exposed customer data may include names, dates of birth, phone numbers, addresses and email addresses, plus the last few digits of some credit cards and bank accounts.

Experts say scammers can combine that information with social media and previous data breaches to create convincing phishing messages, fake identities and even voice clones.

Customers are being urged to watch for unexpected calls and messages, particularly scammers pretending to be Origin, banks or other trusted organisations offering help.

Australia’s small businesses are under growing pressure from higher fuel prices, interest rates and inflation, on top of rising wages and new regulatory costs.

Signs of stress are starting to emerge, with small business insolvency rates starting to tick upward.

Credit agency Equifax says higher-risk businesses are increasingly shopping around for finance, a possible sign they are struggling to secure loans, while some businesses are pulling back on plans to expand.

Business reporter Alison Branley looks at how operators are coping, and why small business groups are calling for more government support as pressures mount.

Oil markets are again on edge over the outlook for global supplies.

Brent futures jumped $6.62, or 7%, to settle at $100.69 a barrel, highest close since May 22.

The global oil benchmark is now almost 40% higher than when the Iran war began in February, with most of that rise coming this month.

US West Texas Intermediate crude climbed $5.36, or 6.2%, to $92.19 a barrel, its highest close since June 4.

Yemen's Houthis have opened another front in the Iran war by targeting vessels carrying Saudi oil through the Bab el-Mandeb Strait, after saying they would impose a naval blockade on Saudi shipments.

Analysts estimate the Strait of Hormuz and Bab el-Mandeb together carry the equivalent of around a quarter of the world's oil supply.

The rise in crude is also adding to inflation concerns because sustained increases in oil prices can eventually flow through to petrol, diesel and other costs for households and businesses.

In Australia, motorists are still receiving some relief, with the government extending the reduced fuel excise for another month, although at a lower rate.

According to the ABC's fuel tracker, as of 7am this morning, the average price of unleaded 91 is 185.2 cents a litre, while diesel is 226.1 cents.

The Trump administration has confirmed a 12.5 per cent tariff will be placed on Australian exports to the US from later today (AEST).

The tariff was proposed last month, after a US trade investigation into forced labour.

The Australian Government and Business Council of Australia made formal submissions opposing the tariff during a consultation period, which ended earlier this month.

The US Trade Representative has just announced the proposed tariff will take effect from 12:01am Friday, local time.

A temporary 10 per cent “global tariff” on the US’s trading partners will expire at the same time.

Australia is not the only affected country, with tariffs between 10 and 12.5 per cent to be placed on imports from 59 other economies, which represent all of the US’s major trading partners.

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