The RBA lifts its cash rate to 4.35%, its third hike of 2026, sending a clear message: inflation is once again a bigger concern than growth.
Governor Michele Bullock says policy is now “slightly restrictive,” but doesn’t shut the door to more hikes.
Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast site, my own website, the Apple podcast store or wherever you go to get your podcasts. Or you can get it at the Business Acumen website at businessacumen.biz
I am Leon Gettler. My job is review and monitor the week’s news in business finance and economics. I bring it all to you every week.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com or whatever your favourite podcast platform is.
This is episode number 14 in our series for 2026 and today’s date is Friday May 8
First, I’ll be talking to Dale Gilham, professional trader and chief analyst at WealthWithin about what we should watch out for when we are trading in this volatile market created by the Strait of Hormuz war..
And I’ll be talking to RMIT economist Sinclair Davidson about the forthcoming budget.
But first, let’s talk to Dale Gilham
So what’s happening in the news?
A lot happening is this week, and it all connects back to one thing: the war in Iran and what it’s doing to energy markets, interest rates and government budgets here at home.
Let’s start with oil. The US has quietly become the world’s number one crude exporter right now, overtaking Saudi Arabia, and it’s basically keeping the global energy system alive while the Strait of Hormuz stays choked off. Tankers are heading from Texas and Louisiana to Japan, South Korea, Thailand, even Australia. Over 250 million barrels in just nine weeks. But here’s the catch — America is burning through its own stockpiles to do it. Reserves have fallen for four straight weeks, and experts are warning this can’t go on forever. ConocoPhillips used the phrase “critical shortages” this week. Chevron’s CEO called it “extreme stress.” Oil prices have jumped around 50% since the war started, with Brent crude hitting $126 a barrel last week.
For Australians, that feeds directly into what you’re paying at the pump. Our regional benchmark — Tapis crude — hit $125 US a barrel on Friday, and analysts are flagging another price spike at the bowser within about a week to ten days. Sydney and Melbourne are sitting around $1.80 for unleaded right now, but that’s about to move. Diesel is already brutal for anyone running a business that relies on transport. The big picture? Australia is caught in a global energy crisis it didn’t start, heading into a budget with limited room to move, while Australians are already changing their behaviour — driving less, combining trips, using public transport more. Whether that discipline lasts if prices spike again is the question to watch.
Staying with the supply chain theme — and following on from our petrol story — there’s a warning now from one of Australia’s biggest food companies. Nestle — the mob behind Kit Kat, Nescafe and Allen’s lollies — says Australians should brace for potential shortages of plastic food packaging, and again, the Middle East conflict is at the heart of it. Andrew Lawrey, who runs confectionery and snacks for Nestle here in Oceania, says stocks look okay right now — but if this conflict drags on, we could start feeling the pinch later this year. The issue is that a lot of the resins used to make soft plastics — particularly food-grade wrapping — come from petrochemicals, and that supply chain is under serious pressure. Polyethylene prices have already jumped as much as 50%. It’s not just Nestle sounding the alarm. Raphael Geminder — the billionaire behind packaging giant Pact Group — told investors back in March that some suppliers had already cancelled or changed contracts, and others had simply put their prices up. A consultant from Kearney, Kate Hart, put it pretty bluntly — she called packaging a “frontline risk,” with three different grades of soft plastics already up between 30 and 50%. So what does that mean for the products on your supermarket shelf? Potentially less variety, fewer specials, and yes — higher prices down the track. Lawrey says Nestle is doing everything it can to absorb those costs rather than pass them on. He described price rises as a “last resort.” But he did flag that consumer confidence has taken a sharp knock to start 2026. On a brighter note — coffee is booming. Nestle’s coffee sales were up more than 15% last financial year, and that’s continued into the latest quarter, with more of us brewing at home instead of buying a takeaway. And Lawrey made an interesting broader point — he says this crisis actually highlights why Australia needs its own circular economy for soft plastics. We’ve got the technology, we’ve got the raw material — we just need industry and government to get their act together.
The Reserve Bank of Australia has lifted interest rates for the third meeting in a row, pushing the cash rate up to 4.35% — unwinding all of last year’s rate cuts in one aggressive tightening cycle. The decision was eight votes to one, and RBA Governor Michele Bullock made clear the Bank now wants to pause and watch how things play out. As she put it, the hikes have bought them “space to be alert to both sides of the risk” — meaning they’re watching for inflation to either get worse or start behaving. And the Middle East conflict is front and centre here. With the Strait of Hormuz effectively closed and the US running a naval blockade on Iran, energy prices have surged globally — and that’s making Australia’s inflation problem significantly harder to solve. Bullock was blunt about it: Australians are poorer because of this shock. The RBA now expects core inflation to stay above its 2 to 3% target through this year and into next, only returning to the 2.5% midpoint by late 2027 — and that’s assuming rates peak somewhere around 4.7%. For households already feeling the pinch at the petrol bowser, higher mortgage repayments are now piling on top. And the timing couldn’t be more uncomfortable for the government — which brings us to next week, and the post-election budget landing right into the middle of all this pressure.
Australian households are about to feel more pain — and there are a few reasons why. The US-Iran war that started in February is still pushing fuel and material prices higher. Businesses are protecting themselves by rewriting contracts and passing costs downstream — and that means families cop the bill. The Reserve Bank has now hiked rates three times this year. Governor Michele Bullock says businesses are right to pass on costs, but her warning is clear — don’t let 4 or 5% inflation become the new normal. Macquarie’s Shemara Wikramanayake says until there’s a permanent resolution to the conflict and the Strait of Hormuz reopens, prices are only going up — and she says that’s a global problem, not just ours. Meanwhile, consumer confidence has hit its lowest point since 1973. You’re already seeing it at the retail end — Dan Murphy’s had a rough March, and Platypus and Hype DC owner Accent Group just cut their earnings forecast. The big picture? Businesses are managing. Households are getting squeezed — and relief isn’t coming anytime soon
Which brings us to Canberra. Treasurer Jim Chalmers is heading into the May 12 budget facing a very uncomfortable set of numbers. The war has added roughly $60 billion in extra pressures — hospitals, defence, welfare, disaster recovery. Australia’s inflation just hit 4.6%, a three-year high, and gross debt is about to cross one trillion dollars for the first time. The fuel excise cut — that 26-cents-a-litre relief — runs out June 30, and the PM hasn’t committed to extending it yet.
On top of all that, the public service story is worth watching. The government hired about 41,000 extra public servants since coming to power, and now agencies are quietly offering voluntary redundancies — particularly targeting middle managers on six figures. PM&C, Home Affairs, Education, CSIRO — they’re all in the mix. The government’s line is this is routine. The opposition’s line is it’s Labor saying one thing at the election and doing another.
So there’s some big tax news coming out of Canberra ahead of the May 12 budget. The Albanese government is planning to overhaul how capital gains tax works — and existing property and share investors won’t be fully protected. If you bought an investment property or shares years ago, you’re not going to be grandfathered out of the changes entirely. Here’s how it would work. Instead of making everyone get their assets revalued — which would be a nightmare and honestly pretty easy to rort — Treasury has come up with a time-based split. So if you’ve owned a property for 10 years before the changes kick in, and then hold it for another five years after, two-thirds of your gain gets taxed under the old 50% discount rules, and one-third gets taxed under the new inflation indexation model. Simple in theory, even if it stings a bit in practice. That inflation indexation model, by the way, takes us back to the Keating era — you’d only pay tax on your real gains after accounting for inflation, rather than getting that flat 50% discount. On top of that, the government is also looking at limiting negative gearing — shades of the 2019 election there — and potentially hitting family trusts with a minimum tax rate of 25 to 30%. Treasurer Chalmers has acknowledged transitional arrangements are being considered, but stopped well short of promising a free pass for existing investors. Big changes, big implications — and we’ll know more on May 12.
So the Albanese government is about to drop some pretty significant tax changes in next week’s budget. We’re talking about winding back negative gearing, scrapping the 50% capital gains tax discount, and cracking down on trusts. Here’s the interesting bit — new homes get carved out of both the negative gearing and CGT changes, which is clearly a nod to the housing supply crisis. The CGT shift takes us back to a pre-1999 inflation indexation model, meaning you only get taxed on real gains rather than that blanket 50% discount. On trusts — if you’re running one, a minimum 30% tax rate on distributions is coming, though farmers and estate planning look set to be exempt. And yes — none of this was explicitly flagged before the election, which Chalmers is trying to spin as “ambitious reform” rather than broken promises. The opposition isn’t buying it.
The electric vehicle fringe benefits tax exemption has been wildly popular — so popular it’s going to cost taxpayers over $23 billion in the next decade, which is about 15 times what Treasury originally budgeted. So the government is scaling it back — but gradually. Nothing changes for the next 12 months. From March 2027, EVs over $75,000 drop to a 25% discount rather than the full exemption. And by April 2029, all vehicles under the luxury car threshold move onto that lower rate. The scheme was always skewing wealthy — nearly a third of leases went to people earning above the top tax bracket. So expect that to be a key part of how they sell the changes.
Here’s a fascinating one from Coles CEO Leah Weckert. Online sales have gone from 3% of Coles’ total revenue to 14% in just five years. She’s now planning for 20 to 30% of all sales going online. But here’s where it gets really interesting — she’s predicting that within five years, roughly 30% of those online orders won’t be placed by humans at all. They’ll be placed by AI agents. We’re potentially talking about $5 billion a year in grocery sales decided by an algorithm. And that raises genuinely fascinating questions. How does an AI agent choose between brands? Does loyalty matter? Does a slick ad campaign? Weckert reckons Coles will have its own agents negotiating with your buying agent in real time. It sounds like science fiction — but she’s planning for it right now.
Mars — the company behind Snickers, M&Ms, Whiskas and Pedigree — is putting $200 million into its Australian factories by the end of 2027, and a big chunk of that is going into robots and AI. The largest single investment is $113 million at their pet food factory in Wodonga, on the Victoria-NSW border. Ten autonomous robots — sourced from Denmark and loaded with sensors and cameras — will handle the repetitive, low-value work on the Whiskas and Dine cat food pouch lines. That facility opens next month. So why the big spend? Margins are under pressure. Inflation in their supply chain is running at around 5% — driven mainly by diesel costs — and the company warns that could climb towards 10%. As managing director Melodie Nye put it: “Like everyone else in the sector, we’re seeing a lot of inflation right now. It comes first in the diesel fuel.” And the financials tell that story clearly. Revenue was essentially flat at just under $2 billion, and net profit was almost identical year-on-year at $187 million. Not going backwards — but not growing either. On the retail side, about 40% of their pet food goes through Coles and Woolworths, though Amazon is making serious inroads — double-digit growth, according to Nye. Meanwhile, both supermarket giants are under political pressure to hold prices down, which makes it harder for suppliers like Mars to pass on those rising costs. One bright spot — Australians are still spending on pet food even as household budgets tighten. Though some of the premium pet treat products are, as Nye says, starting to “feel the pinch.”
And that’s it for this week.
And next week, I’ll be talking to Chris Van Langenberg about generative engine optimisation (GEO) for businesses.
And I’ll be talking to AMP Capital chief economist Shane Oliver about Australia’s inflation and the RBA’s decision to raise rates.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com or whatever your favourite podcast platform is.
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