New Government advice has revealed that Treasurer Jim Chalmers is continuing to blame the Middle East oil crisis for Australia’s inflation problem as public sector wages continue to soar under Labor.

During the week of the May 12 Budget, a Treasury ministerial submission to Dr Chalmers argued 72 per cent of businesses were “negatively impacted” by fuel prices or availability issues.

More than a third or 36 per cent reported revenue had dropped during the previous four weeks while just over a quarter or 27 per cent expected their revenue to fall over coming weeks.

About two-thirds of businesses — 60 per cent — reported “making changes to business operations due to fuel prices or availability in May”.

The ministerial submission — titled Middle East Update — was dated May 8-15, during the week of the May 12 Budget with credit given to Tim Baird, the assistant secretary of Treasury’s financial system division, and Penny Sirault, the assistant secretary of Treasury’s labour markets, industry and infrastructure division.

The advice was given five weeks after fuel excise was temporarily halved by 32 cents a litre, before it was extended beyond July 1 for another month at a tapered rate of 16 cents a litre.

Robert Monterosso, a research fellow with the United States Studies Centre’s economic security program, argued Democrat controlled of the US Congress could result in cheaper diesel prices for Australian motorists as these lawmakers used their numbers to restrict financing for President Donald Trump’s Iran war.

“They might approve funding but attach different bargaining chips involved so hypothetically they could fund the war in Iran but with concessions made elsewhere from tariffs or on healthcare for example,” he told The Nightly.

“The Democrats, they’re focused on getting costs of living down, diesel prices are a big part of that and a big part of that is the war in Iran so there’s potential for there to be a slowdown in the war in Iran.

“Any de-escalation in the Strait of Hormuz would likely lead to a pretty big drop in crude oil prices - it’s a global market so when prices are lower in the States, they’re usually lower globally, particularly because the States is the largest exporter of diesel and crude oil.”

Higher prices for goods and services made in Australia are continuing to be the key driver of inflation instead of imported price pressures, with Reserve Bank governor Michele Bullock on Tuesday noting public demand was adding to total aggregate demand.

Generous public sector wage increases are another factor with Commonwealth pay levels soaring by 7.2 per cent during the last financial year, which was double June’s annual inflation pace of 3.8 per cent, new Australian Bureau of Statistics data revealed on Thursday.

Sean Crick, the ABS’ head of labour statistics noted public administration and safety, education and training and care economy jobs together accounted for 90 per cent of public sector jobs and wages.

Health care and social assistance recorded the strongest rate of growth in 2025-26 for both jobs and wages, with the wages bill surging by 8.5 per cent as 29,700 new jobs in that field were created at the State and Federal level.

Under Prime Minister Anthony Albanese’s watch, Commonwealth Government pay levels had doubled from 4.9 per cent in 2022-23 to 9.9 per cent in 2023-24 before moderating slightly to 9.4 per cent in 2024-25.

Ms Bullock blamed domestic inflationary pressures for hiking rates for the fifth time in 2026 to an 18-year high of 4.85 per cent, stressing the Middle East oil crisis had not sparked the latest 25 basis point increase.

“I want to be very clear that we are not tightening monetary policy because of the direct impact of oil prices on inflation,” she said.

“I know there is confusion in the community, so I want to be very clear. Monetary policy cannot impact global oil prices.

“Rather, the tightening in monetary policy is to address domestic capacity pressures.”

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