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Could a ports hacking problem force interest rates up again?

Peter Switzer
13 November 2023

A boring story such as trouble at our docks gets serious when it’s another hacking story with implications for both inflation and interest rates, just when the Reserve Bank’s boss has hinted, she’d prefer not to raise rates for a 14th time.

By the way, some media commentators are suggesting this shows Treasurer Jim Chalmers has been trying to influence Michele Bullock. While this is possible, it’s also probable that as a well-trained economist, the RBA Governor knows she’s gambling that her 13th rate rise could end up being excessive.

Interest rate policy is always a gamble, but with the mortgage cliff still to fully play out, Ms. Bullock knows there could be a kick in the guts for the economy when all home loan borrowers lose their low fixed rate loans and end up on high variable rate loans.

Against that, the RBA Governor has sensibly said she’ll be guided by the economic data. If it looks like there’s a “material” rise in inflation, she will act — and that means a 14th rate rise.

Enter this supply side problem for one of this country’s biggest port operators, which has a cyber threat that has clogged its container business, with piles of products going nowhere. Remember, it was a supply problem especially out of China that kickstarted our inflation surge. This lack of goods for business and consumers means this container crisis could force up prices/inflation and add pressure on the RBA to raise rates again!

The Daily Telegraph’s Perry Williams reports that an estimated 30,000 shipping containers are stranded. This adds more pressure on DP World to quickly fix their cyber breach. “DP World Australia is working closely with government and private sector stakeholders to identify and retrieve sensitive inbound freight,” the stevedoring company told The Daily Telegraph.

However, at this stage, the company has no good news on the subject, and as the Optus and Medibank hacking incidents have shown, there are often no quick fixes. That could be bad news for our fight against inflation, as DP World handles about 40% of the goods that flow in and out of this country.

A researcher at Deakin University’s Centre for Supply Chain & Logistics, Peter Van Duyn points out that “…if you can’t move any containers, then the storage yard is going to be completely full, and there will be a backlog of ships also waiting to unload.” That’s an anatomy of not only a supply drama as shops stock up for Christmas and builders try to complete projects before the holidays, but also a potential higher prices problem. AMP Capital chief economist Shane Oliver told the Telegraph that prolonged disruptions would be ­inflationary. “If it’s a few days, then I think we can get through without too much impact, but if it’s weeks, however, it could be a supply shock and they tend to be inflationary,” Dr Oliver said. “That would mark a bigger problem and then it also presents a dilemma for the Reserve Bank.”

That’s it in a nutshell! If this goes on longer than we hope and inflation kicks up in coming months, the RBA could raise rates again, even if the problem isn’t demand but supply. Of course, Michele Bullock could gamble and hope the other forces bringing down inflation weigh against this possible supply shock to prices. However, there are economists like former RBA board member and eminent ANU economist Warwick McKibbin, who think because of the Albanese Government’s big spending, that the cash rate now at 4.35% might have to go to 5%!

That would be an inflation and economy killer, which would probably put us into recession, and Albo and his team out of government! Clearly, this container supply story isn’t boring.

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