Australian business, consumer confidence plunges on Iran war fallout

Surveys show economic shocks could tip Australia into recession as policymakers weigh further rate hikes

Apr. 14, 2026 at 2:50am

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A minimalist composition of overlapping triangles in shades of red and blue, conveying the concept of stagflation through bold, abstract shapes and colors without any text or literal imagery.Geometric abstraction captures the conflicting economic forces of soaring inflation and plunging growth in Australia amid the fallout from the Iran war.NYC Today

Australia's business and consumer confidence have crashed as the Iran war unleashed a global oil shock that may tip the local economy into a recession, according to surveys released on Tuesday. The National Australia Bank's business confidence index tumbled 29 points to -29 in March, while a separate consumer sentiment survey showed a 12.5% plunge to 80.1 in April, the lowest in more than two years. The economic outlook has also been tempered by two consecutive rate rises from the Reserve Bank of Australia as policymakers worry the spike in fuel costs could unmoor inflation expectations.

Why it matters

The sharp declines in business and consumer confidence point to growing concerns about the economic fallout from the Iran war, including supply and demand shocks that could push Australia into a period of stagflation. Policymakers now face the challenge of balancing inflation pressures with the risk of tipping the economy into recession.

The details

The National Australia Bank survey showed business activity held steady at a healthy +6, but purchase costs for businesses jumped by a quarterly rate of 3% in March, up from 1.3% previously, as higher energy costs fed through to transport, utility and construction industries. However, retail price growth fell to 0.5%, suggesting businesses may be struggling to pass through the higher costs to consumers. The consumer sentiment survey also showed a 15% plunge in an index measuring appetite for large purchases as consumers tightened their wallets.

  • The surveys were conducted in March and April 2026.
  • The Reserve Bank of Australia has raised interest rates by two consecutive hikes this year, bringing the cash rate to 4.1%.

The players

National Australia Bank (NAB)

One of Australia's largest banks that conducts a monthly survey of business confidence and activity.

Reserve Bank of Australia (RBA)

Australia's central bank, which has raised interest rates to combat inflation pressures stemming from the Iran war.

Andrew Hauser

Deputy Governor of the Reserve Bank of Australia, who warned that the economic shocks could push Australia into a period of stagflation.

Shane Oliver

Chief economist at AMP, an Australian financial services company, who commented on the economic risks facing Australia.

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What they’re saying

“We've got this problem for businesses now. Not only has their confidence collapsed and their costs are going up, but consumer confidence has collapsed and that's going to impact consumer demand.”

— Shane Oliver, Chief economist at AMP

“If the oil starts flowing through the Strait of Hormuz really quickly, then we probably avoid recession. But if it doesn't, then I suspect by the time we get to the end of next month, we'll have to see fuel rationing and that's when the economic impact really starts to bite.”

— Shane Oliver, Chief economist at AMP

“I don't think those surveys necessarily tell you a lot about what consumption is going to do. But if they're right, we have a big income shock coming our way ... So it is the central bank's nightmare: the stagflationary shock - inflation up, activity down.”

— Andrew Hauser, Deputy Governor, Reserve Bank of Australia

What’s next

The Reserve Bank of Australia will closely monitor consumption and inflation data in the coming months to determine if further interest rate hikes are needed to address the stagflationary pressures.

The takeaway

The sharp declines in business and consumer confidence in Australia highlight the significant economic risks posed by the fallout from the Iran war, including supply chain disruptions, soaring energy costs, and the potential for a recession. Policymakers face a delicate balancing act in trying to tame inflation without further damaging economic growth.