The Australian government has announced plans to extend its trade sanctions on Russia for an additional two years until October 2025, previously expected to be lifted at the end of this month.
“The extension of this additional duty aligns with measures implemented by like-minded nations,” Minister for Home Affairs Clare O’Neil said in a statement on Oct. 18.
“Australia unambiguously condemns Russia’s illegal, immoral, and unprovoked invasion of Ukraine. We support Ukrainians’ sovereignty, territorial integrity, and right to self-determination.”
These sanctions were initially imposed in response to Russia’s invasion of Ukraine in February 2022 when the Morrison Government enforced a 35 percent customs duty on goods entering Australia from both Russia and Belarus.
The incursion is part of an ongoing Russo-Ukrainian war that initially began in 2014 with Russia’s invasion of the Crimean Peninsula, a disputed territory it eventually annexed.
Australia first implemented trade sanctions on Russia in 2014 and has consistently renewed them since.
Australia has formally supported Ukraine’s right to sovereignty since the outbreak of the war in 2014.
In its ongoing conflict with Russia, Australia’s financial assistance to the Eastern European nation to date totals over $890 million (US$568 million), comprising $710 million in military equipment.
Additionally, the Australian Department of Home Affairs has expedited visa applications for Ukrainian refugees, granting over 10,000 visas since Feb. 23, 2022.
Russia’s war with Ukraine constitutes the largest attack on a European nation since World War II. It is estimated to have claimed the lives of over 500,000 troops and just under 10,000 civilians as of September. It has resulted in a humanitarian crisis not seen in the continent in decades, with thousands of Ukrainian citizens internally displaced or fleeing abroad.
Inflationary Effects
It has also done immense damage to economies across the globe, exacerbating pre-existing cost-of-living pressures spurred by the COVID-19 pandemic.Measures taken by governments to curtail the spread of the pandemic like lockdowns and stimulus payments were subject to an inflationary lag effect. In Australia for example, most people were inside and not able to spend their stimulus packages until lockdowns were lifted.
Many businesses were shut down, both temporarily and permanently, during lockdowns, and thus supply across the economy was curbed. When the country once again opened up, people began to spend their saved stimulus money on a limited supply of goods, creating unprecedented inflation.
Putin’s Ukrainian invasion only intensified this trend as trade sanctions and barriers were applied to Russia from countless nations worldwide. Russia has responded by suppressing the exports of critical commodities conducive to manufacturing capabilities across the Western World.
Most recently, it temporarily banned diesel exports to stabilise its domestic markets, a ban it lifted on Oct. 9.
Russia and Ukraine are some of the world’s major commodity producers. Russia alone is the world’s largest oil exporter and second-largest crude oil exporter behind only Saudi Arabia, accounting for 13 percent of global production.
Australia’s lack of ability to process and refine crude oil has made it vulnerable to the externalised effects of instability in Eastern Europe. Since it doesn’t produce any of its own, it is reliant on imported crude oil from foreign producers.
According to research conducted by the Reserve Bank of Australia (RBA), both supply chain disruptions from the pandemic and the war in Ukraine have caused the majority of inflationary spikes realised nationwide.
RBA economists Ben Heckers, Jonathan Hambur, and Tom Williams used a number of methods to determine the cause of the upward pricing pressure experienced over the past 18 months.
They concluded that around half, two-thirds, and three-quarters of underlying inflation over the year to March 2023 can be attributed to supply constraints.
“These supply-side factors have been persistent, with their contribution to inflation growing over 2022, leading to an extended period of inflation being above target and concerns that inflation expectations could become de-anchored”, they said.
They did however maintain that should these supply shocks not have occurred, headline rates of inflation would still have been above the RBA’s target ranges. They also touched on the effects of increased levels of demand.
“Demand has also been an important driver of recent inflation outcomes; measures of capacity utilisation have been very high and labour market spare capacity has been at multi-decade lows. Taken at face value, these results suggest that inflation would still have been above the Reserve Bank’s target range even if the contribution of supply factors was excluded from the estimates above.”
