Reason RBA set to 'punish' Aussies as businesses warn of 'Covid 2.0' price spiral

March 16, 2026 - 09:23

A stark warning from Australian businesses suggests the nation could be facing a new wave of inflationary pressure, reminiscent of the supply shocks seen during the pandemic. This looming threat is set to dominate discussions at the Reserve Bank of Australia's current policy meeting, with economists predicting a potential interest rate hike to counter what some are calling a 'Covid 2.0' price spiral.

Industry leaders report that persistent supply chain disruptions, soaring energy costs, and heightened geopolitical tensions are creating a perfect storm. These combined forces are driving up business input costs at an alarming rate, costs which are increasingly being passed on to consumers. The situation bears an uncomfortable resemblance to the initial pandemic-induced inflation, but with new and complex global drivers.

This puts the RBA in a difficult position. Its mandate to return inflation to target may require further monetary tightening, a move popularly framed as 'punishing' mortgage holders. However, the Board argues such measures are necessary to prevent even more severe economic pain from entrenched inflation. The dilemma highlights the fragile balance between curbing price rises and managing household financial stress, with the specter of 1970s-style stagflation adding urgency to the Bank's deliberations. The coming decision will signal how seriously the central bank views this emerging business-led price threat.