Australia's Fuel Reserves

Australia's fuel vulnerability didn't begin when the first US strikes hit Iran. It began around 2012, when Australia quietly fell below the 90-day oil reserve requirement it had been treaty-bound to meet since joining the IEA in 1979 – and stayed there.

By the time the current crisis started, Australia's reserves sat at around 36 days of petrol, 32-34 days of diesel, and 29-32 days of jet fuel – figures the government has cited as the highest in 15 years. That context matters, but so does what those numbers actually mean. Multiple non-comparable metrics, different inclusions for ships on-route and/or in Australia's exclusive economic zone, and the question of what is continuing to arrive and what has been released since make it surprisingly difficult to pin down the true usable buffer at any given moment. The fact that we can't get a clean number after a crisis has already started is itself part of the story.

Once fuel already in transit is stripped out, the usable buffer may be materially closer to four weeks. The critical reserve appears to be jet fuel. China – which supplied roughly 32 per cent of Australia's jet fuel imports in 2025 – has instructed refiners to halt new fuel export contracts, a move expected to cut Australian supply from April.

Australia's savings problem and the current account deficit

Introduction

Take a look at the chart above. At first glance it’s just two wiggly lines. But those two lines tell a story about the Australian economy that stretches back more than half a century – and it’s a story that affects everything from your mortgage rate to your superannuation.

The Australian Economy: Q4 2025

Introduction

I run several Bayesian macroeconomic models of the Australian economy. They fit the data to the model structure and estimate how much each variable is contributing to the key unobservables – the natural rate of unemployment and the potential growth rate. What follows is what those models are currently telling me.

But first, let's quickly recap on the RBA's policy rate, the current state of Australian inflation, and the current unemployment rate.

Q4 2025 National Accounts Update

An update to my December 2025 Economic Outlook

Introduction

Every national accounts release contains both good and bad news, and Q4 2025 is no exception.

GDP per capita is improving. Labour productivity is moving in the right direction. Real wages have reached a new high. These are genuine improvements, not statistical noise, and they deserve acknowledgement.

But the balance of this release tilts toward concern rather than celebration. Domestic inflation remains stubbornly above target. Unit labour costs are still too high. Government spending continues to crowd out private activity. And the RBA is now reversing rate cuts it should not have made.

This is not a crisis. It is not the end of the world. But the list of issues requiring attention is longer than the list of developments deserving applause.

The Headline: GDP Growing above Inflationary Speed Limit

GDP growth has lifted from the anaemic sub-1.5% rates seen through much of 2024. But 2.56% annual growth is not a recovery – it is the economy running above its compressed speed limit of roughly 2%. Australia’s potential has fallen over the past decade as productivity stagnation has lowered the economy’s supply capacity.

The December outlook argued that near-2% growth reflects supply constraints rather than demand deficiency. The Q4 data confirms this: growth has accelerated and domestic inflation remains elevated. That combination only occurs when an economy is at/above capacity. There is no spare room here.

Follow the Science: Science, Uncertainty and Values in the Pandemic

This essay is a companion to Is Macroeconomics a Science? which examines the epistemological status of macroeconomics as a social science – its reliance on provisional models, its forecasting limitations, its embedding of value judgements within technical frameworks, and the tension between orthodoxy and productive dissent. The pandemic exposed remarkably similar dynamics in public health: provisional models communicated as certainty, values disguised as science, dissent suppressed rather than engaged, and institutional authority overextended beyond what the evidence could support. The parallels are not coincidental. They reflect a structural problem in the relationship between expertise and democratic governance that applies wherever technical knowledge is used to justify political choices.

How Interest Rate Targeting Works

In my previous post on monetary policy transmission asymmetries, I leaned too heavily on the mortgage repayment channel – the "cash-flow" story – when explaining why rate hikes transmit fast. Peter Tulip rightly called this out: the consumption research suggests the cash-flow channel is less important in aggregate than the public discussion implies.

He's right. And it's worth a more detailed treatment, because understanding which channels actually matter – and how much – is essential background for evaluating the alternative instruments people periodically propose for managing inflation.

Monetary Policy: Asymmetries, Lags, and the Case for Purposefulness

Introduction

The textbook story of monetary policy is deceptively simple: raise rates to cool inflation, cut rates to stimulate demand. In practice, the transmission mechanism is neither symmetric nor uniform. Different channels operate at different speeds, rate hikes bite harder and faster than rate cuts heal, and the labour market – the variable central bankers care most about – is the slowest to respond. Understanding this structure explains both why central banks should be deliberate in their actions, and why a rapidly falling unemployment rate during above-band inflation is one of the most worrying signals in macroeconomics.