<div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>From the fallout from the war in the </span><a href="https://www.9news.com.au/middle-east" rel="" target="" title="Middle East"><span>Middle East</span></a><span>, to rising </span><a href="https://www.9news.com.au/inflation" rel="" target="" title="inflation"><span>inflation</span></a><span> and increasing unemployment, there's no denying the current </span><a href="https://www.9news.com.au/economy" rel="" target="" title="economic"><span>economic</span></a><span> outlook is bleak.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>One of Australia's foremost economists has issued a dire warning about a rare economic phenomenon not seen in Australia since the 1970s.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Speaking in New York this week, Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser brought up stagflation - an economic challenge he described as a "central banker's nightmare".</span></div></div><div><div id="adspot-mobile-medium"></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Here's everything you need to know about stagflation, and what it means for everyday Aussies.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><strong><span>FUEL CRISIS:</span></strong><span> </span><a href="https://www.9news.com.au/national/consumer-confidence-index-covid-fuel-economy-spending/a5c40de7-bf31-4a4b-ade6-43f48375cfed" target="_blank"><strong><span>Petrol shock sends consumer confidence plummeting to near-COVID low</span></strong></a></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><h3><strong><span>What is stagflation?</span></strong></h3></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>The word stagflation is a combination of stagnant economic growth and high inflation. It describes the scenario when the economy doesn't grow, but costs of living do.</span></div></div><div><div class="OUTBRAIN" data-reactroot="" data-src="//www.9news.com.au/national/stagflation-explained-meaning-causes-impacts-australian-economy/4c116f85-2f24-4d92-9c69-187661a21d5b" data-widget-id="AR_5"></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>The term was coined in 1965 by British politician Iain Macleod in a speech to parliament where he describe the UK's economic situation as "the worst of both worlds".</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Today, global energy shock, typified by the fuel crisis, coupled with creeping inflation in a number of developed countries including Australia has thrust stagflation back into the spotlight.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><strong><span>READ MORE:</span></strong><span> </span><a href="https://celebrity.nine.com.au/latest/ruby-rose-files-police-report-allegations-against-katy-perry/4631ea11-45d7-4be7-a545-4740e2eb4646" rel="" target="_blank" title=""><strong><span>Victorian police investigating sexual assault allegations against Katy Perry</span></strong></a></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><h3><strong><span>Has Australia experienced stagflation before?</span></strong></h3></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Australians experienced a stagflation crisis for the first time on record in the late 1970s.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Across the decade, twin oil embargoes in the Middle East triggered soaring fuel prices across the globe, which contributed to skyrocketing inflation and a collapse in economic growth.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Jobs were slashed as a result, and recession eventually followed in 1982.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>It's important to note that stagflation does not have a quick fix - it was almost a decade before the initial energy shock in 1973 actually eventuated in recession in Australia.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><h3><span> </span><strong><span>Is Australia at risk of stagflation again?</span></strong></h3></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>The Australian economy is experiencing some of the factors that lead to stagflation.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Since the start of the conflict between the US, Israel and Iran, the global oil benchmark Brent crude price has risen more than 50 per cent, sending fuel prices and supply costs at home through the roof.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>At the same time, Australia's annual inflation rate remains above the RBA's target band of 2 to 3 per cent.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><strong><span>NATIONAL:</span></strong><span> </span><a href="https://www.9news.com.au/national/hancock-mining-riches-court-case-judgement-day/74b1a1a9-cbdd-484d-a8cf-674969785ed5" rel="" target="_blank" title=""><strong><span>Gina Rinehart's mining behemoth ordered to pay up to rivals</span></strong></a></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>The unemployment rate also rose to 4.3 per cent in February, up from 4.1 per cent in seasonally adjusted terms.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>The International Monetary Fund (IMF) released modelling on the potential impact of an ongoing oil shock on the global economy.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>The IMF warns the war could spark an energy crisis on an "unprecedented scale" that may trigger a global recession.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Neither a recession nor a stagflation crisis is guaranteed, but senior economists are clearly planning for the worst.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><h3><strong><span>Why is stagflation bad?</span></strong></h3></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>In simple terms, stagflation can decrease purchasing powers and chips away at household savings, diminishing consumer spending.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>It's also difficult for economists to correct, meaning economic impacts such as falling employment and even recession can drag on for years, as seen during the 1970s stagflation episode.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><h3><strong><span>Can the RBA stop stagflation?</span></strong></h3></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Hauser referred to stagflation as a "central banker's nightmare" because it is difficult to control, mainly because fighting inflation can further weaken the economy.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>Essentially, the RBA is trapped between lifting interest rates to combat inflation and cutting interest rates to protect jobs.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>That means next month's federal budget and the RBA's next interest rates meeting will be pivotal.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><strong><span>READ MORE:</span></strong><span> </span><a href="https://www.9news.com.au/world/seventy-palestinian-men-found-hiding-in-garbage-truck/074e773d-e265-4220-9d08-85eace65ca4b" target="_blank"><strong><span>Israeli police discover 70 men packed inside garbage truck</span></strong></a></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>The Reserve Bank is tipped to hike the cash rate for a third consecutive time when it meets in the first week of May, so efforts to combat rising inflation are under way.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>But the RBA's best hope is that the war ends soon and oil prices retreat.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>If a peace agreement is reached by the end of June, economic growth in Australia would still be slashed by more than half to 0.7 per cent, pushing unemployment to more than 5 per cent for the first time since 2021, according to Deloitte modelling conducted for the </span><em><span>Australian Financial Review</span></em><span>.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>But, Hauser noted, navigating economic challenges is how central bankers make a living.</span></div></div><div class="block-content"><div class="styles__Container-sc-1ylecsg-0 goULFa"><span>"You know, the stagflationary shock: inflation up, activity down. Judging the balance between those two is, I guess, how we earn our money," he said.</span></div></div>