The conflicts shaking markets

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The state of the world ain't great. There are major conflict flashpoints that are roiling global markets, including a new flare up in the war between Iran and the US. Last week, it seemed the United States was trying to win this conflict through economic means, through sanctions and blockades, attempting to squeeze Tehran financially. But missiles and rockets are being exchanged again with the US launching fresh strikes around the Strait of Hormuz. Today we've got a special guest who will talk us through how he's seeing that conflict and why he's so worried about a major escalation in the war between Russia and Ukraine and what it might mean for the Australian economy. Welcome to ABC Business Daily.
I'm Carrington Clarke and today I've got something a little different for you. Shortly I'll be joined by Madison Cartwright. He's an experienced geopolitical and geoeconomic analyst who's now at the Commonwealth Bank and who previously taught at universities across Australia and Canada. He spent a lot of time thinking about exactly this sort of thing, how wars, trade disputes and tensions between the world's biggest powers flow through markets to energy and trade and eventually into economies like ours. But before we go global, as we're recording, we've just learned how the Australian economy was performing in the three months to June. So let's quickly get across those numbers first. The headline figure is that Australia's gross domestic product grew by 0.4% into that June quarter. That is after that 0.3% rise that we saw in the previous three months. Now, that means that the annual growth rate dropped from 2.5% down to 2.1%.
So it's slowing, but it's above the forecasts, which were of 1.8% annual growth. And I think the big concern here will be that we have a growth rate, an annual growth rate with a 2 at the beginning. And given what we've seen recently, the Australian economy doesn't seem to be comfortably able to grow at 2% or above without causing an outbreak of inflation. And obviously, that is the biggest issue for the Australian economy right now.
Given we had that higher than expected inflation read last week, all else being equal, this will put further pressure on the Reserve Bank to hike interest rates at their meeting later this month. And the issue for them is we won't get another inflation read, even though it comes out monthly until after they have to make that decision. Some interesting tidbits in the data. We are still seeing strong growth in discretionary spending. So even though people talk about things being tough, and it is undoubtedly tough for many people, people are still spending on things that aren't essential. And one of the interesting ones was that half that discretionary spend was actually coming on vehicles. And that is about the big uptake that we've seen in battery electric vehicles and hybrids, obviously connected to what's happening with global energy markets. And this huge inflection we seem to have seen where people are now embracing those purchases. So the data will now be poured over by economists across the country. And particularly of importance, of course, is what the Reserve Bank makes of it. Usually we'd be talking about stronger growth, stronger than forecast as a good thing. But I think in this current environment, it will concern a lot of people. So that is the state of play, or at least it was the state of play at the end of June here in Australia. But let's talk about what's happening globally. And we have had this flare up once again of tensions between the United States and Iran. Last week, we had the announcement that the US was going to be, well, they called it economic D-Day for Iran, that there was going to be operation, economic outcast. I think the markets were pretty disappointed by what was actually announced. Yes, some sanctioning of some particular entities, some individuals, but they didn't go after Chinese banks, which seemed to be what markets were waiting to see and whether or not that would actually move the dial. Madison Cartwright, I want to get your immediate take on what we've seen overnight, how concerned should we be?
And what's your view on the state of this conflict between these two sides?