A deepening global oil shock is shifting from a distant geopolitical risk to a direct concern for mortgage brokers, as higher energy and transport costs threaten to keep inflation elevated and delay relief on mortgage rates in Australia and New Zealand.
Westpac chief economist Luci Ellis (pictured left) argues this latest disruption to fuel supply is unlike recent supply shocks, with more persistent consequences for inflation and interest rates.
In Westpac’s weekly economic note, Ellis warns that “the outlook for Australia and the world is rough.” The damage to key oil and gas infrastructure means a quick return to pre‑war energy prices is unlikely, even with a ceasefire around the Strait of Hormuz.
She suggests the near‑term picture is one where households are squeezed by some combination of higher interest costs, softer income growth, and a softer labour market.
Building costs are already reacting, with preliminary Westpac estimates indicating the cost of constructing a detached home is up as much as 10% – a key issue for clients taking out construction loans or stretching to buy new stock.
Westpac’s latest Cliff Notes report stresses that, despite the ceasefire, inflation pressures have not disappeared.
Household spending was still edging higher before the conflict intensified, but Westpac’s card‑spending data now point to slower growth as fuel prices and weak sentiment bite. As the report puts it, “Risks for the Australian consumer are therefore likely to linger,” even if petrol prices stop rising from here.
In New Zealand, the Reserve Bank left the official cash rate unchanged but delivered a notably hawkish message, with a sharper focus on second‑round inflation effects. Westpac NZ has brought forward its expected first rate hike of the next cycle to September 2026 from December, signalling that policy rates may stay elevated for longer on both sides of the Tasman.
Beyond Australia and New Zealand, the global policy backdrop is also becoming less supportive.
In a media release, Commonwealth Bank strategist Joe Capurso (pictured right) notes that “The energy shock has materially changed the inflation outlook,” particularly in the United States, where stronger demand and higher fuel costs are expected to delay any move to easier policy.
A later pivot by major central banks limits how quickly the Reserve Bank of Australia and Reserve Bank of New Zealand can reduce local borrowing costs without putting further downward pressure on their currencies.
For mortgage brokers, the combined message is a base case of sustained energy prices, persistent inflation risks, and central banks that are more inclined to hold or raise than cut. That implies a longer period of elevated mortgage rates and rigorous serviceability tests, with careful scenario analysis essential for clients considering refinancing or expanding their property portfolios.
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