Vladimir Putin is not only threatening the people of Ukraine, he’s set to hit the real incomes of all Australians, which fall when inflation spikes. And the war is driving up petrol prices, so shipping costs are going through the roof, which will ultimately push up inflation.

Economists say what you earn in your pay-packet is your nominal or money income but what your wage buys is your real income. As inflation rises, you can buy less, so your real income falls. And Putin and his war are driving up petrol, resource and food prices, so he’s threatening you and/or your family’s standard of living.

It's also driving up the share prices of the likes of Woodside Petroleum, BHP and Graincorp while starting to hurt travel and related tourism businesses as fewer people are interested in going to Europe for both war and post-pandemic reasons.

Webjet one month

Webjet’s share price is down 4.7% in a month, while Qantas is down 9%. They could easily go lower today with talk of the West actually getting physically involved in the war. On the other hand, Woodside is up 17.4% and should go higher today.

These obvious winners and losers will affect inflation in opposite directions as less demand for flying will result in lower prices to attract customers. But the biggest effect in prices will come through spurting oil prices.

The AFR is warning online shoppers and e-commerce businesses about rising shipping costs, after Australia Post imposed a record 3.1% fuel surcharge for April, up from 2.3% this month because of booming petrol prices.

The surcharge is driven by the national average price of petrol, and with Brent crude near $US120 a barrel (up about 40% this year), shipping costs have to go sky-high.

The RBA has warned of rising inflation. Interestingly, that should lead to more pressure to raise interest rates but because of the uncertainty about what the war could do to demand, both the US Federal Reserve and our RBA have hinted that Putin’s behaviour could slow up expected interest rate hikes.

It will all get down to how long the war goes on and whether the West actually gets involved in a real fighting sense. And then how Putin, and even possibly China, reacts.

Chinese Premier Li Keqiang said the country's external environment is becoming “volatile, grave and uncertain”. China's economy has suffered amid anti-COVID-19 measures and a crackdown on real estate debt. This is a country that needs a booming global economy but its ally, Russia, is threatening this, despite having expansionist desires directed at Taiwan.

Over the weekend, in a report to the country's legislature, Li Keqiang said China will aim for growth of “around 5.5%” this year. “Achieving this goal will require arduous efforts”.

Last year, China aimed for economic growth of 8.1% so this Putin problem isn’t well-timed for the world’s second-largest economy.

And after two years of the Coronavirus, the world economy needed this Ukraine war like a hole in the head.

Locally, our economy is set for a strong growth year as the National Australia Bank-Seek employment report implied. It showed that job ads rose 2.2% in February after a 5% rise in January, and the jobs market is expected to remain tight. “Job ads made a new record high in the month and are now 57.8 per cent above pre-pandemic levels,’’ NAB economist Taylor Nugent told the AFR.

A tight labour market with unions and individual workers pushing for higher wages with hundreds of thousands of temporary, foreign workers still absent from the labour force, and petrol prices surging, means inflation is set to undermine the purchasing power of employees’ wages and business owners’ profits.

The longer this war, the greater the inflation threat will be to our real incomes, the strength of the economy and jobs created.

The pressure will be on central banks to get their interest rate policy right or else they could create a Putin-‘inspired’ recession!