What’s that? You want to know my top five money-related songs? Say no more.

Send me your favourite that didn’t make my cut, and I might make us a TDA Finance playlist.

There are a lot of conflicts around the world right now. In the past two weeks, the growing conflict between Israel, Iran and the U.S. has dominated headlines. And you may have seen stories about oil prices that imply a connection with these conflicts. Why do conflicts move oil prices?

Let’s look at the current conflict in the Middle East. Since Israel launched its first attack on Iran on 13 June, oil prices have jumped up, and since the U.S. joined the conflict on Sunday they’ve jumped up even further.

\Why is this war affecting oil prices specifically? There’s two ways to think about this - the connection between oil production and the region in focus, and how it affects global confidence.

Let’s start with how people are feeling. The reason is because of the perceived risk that the war could affect global oil supplies. Essentially, people who buy oil think “ok this war could affect the supply of oil in the future, and given this added level of uncertainty about future oil supply, I am willing to pay more today. Better to be safe than sorry”. These people include companies that use oil (e.g., airlines, shipping companies, energy companies), investment companies (which trade oil to make money), and sometimes governments.

But why might the war affect global oil supplies? Well there are three possible channels.

First, Iran is a major oil producer. So if there is war in Iran, there is a chance that their oil production facilities would be damaged, and this would directly lower the global supply of oil.

Second, around 30% of the world’s oil trade (e.g., including exports from Saudi Arabia, Kuwait, and the UAE) transits through the Strait of Hormuz, a body of water bordering Iran. There is a risk that if the conflict escalates, this shipping lane could be closed or become the target of attacks, further limiting supply.

Third, sanctions might be imposed on oil exporters, which would also increase the cost of exports. So in summary, you can think about the war as a shock to the supply of oil.

You can also make a more general point about the connection between where oil is produced and the frequency of conflict in that region. Oil is known as a commodity - raw materials that we either dig up from the ground (e.g., oil, gas) or grow from the earth (e.g., wheat, coffee).

Many of the world’s biggest producers of key commodities are located in regions that are politically unstable or prone to conflict. For example, oil in Iran, gas in Russia, wheat in Ukraine, and cobalt in the Democratic Republic of the Congo. When conflicts erupt in these regions, there is a risk that production facilities may be damaged, potentially disrupting global supply.

Also, control over commodities can often become an objective of war or a key lever within it. Think Houthi rebels in Yemen targeting commercial ships, or the Nord Stream pipeline sabotage (the pipeline that carries gas from Russia to Europe). All eyes are on Iran to see if they will restrict the flow of oil to the rest of the world as a tool of retaliation.

So here’s the tldr: conflicts can often become a supply shock in commodity markets. This is what causes the volatile price movements. In next week’s newsletter, I’m keen to follow this through to your cart at the supermarket, or at the petrol pump.

They say economic growth is all about spending. So… should we go out for dinner?

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Because boosting the economy is great, but boosting your savings and eating well? Even better.

Last week, we talked about productivity and how it was important if you were a baker and wanted to bake more bread:

“Let’s go back to the bakery. And let’s say you choose to increase the number of loaves you produce through…hiring more bakers and buying more ovens. Eventually, you’ll hit limits. Your bakery is too small for more ovens, and there are no more bakers to hire. So, how do you increase your output? Your only option is improving productivity.”

What if you don’t want to increase the number of loaves you produce? What if you’re perfectly happy with the number of loaves you have?

Well, the main reason why the government wants to boost productivity is because productivity drives economic growth. But what is growth? And why do we care?

Economic growth is the increase in the value of an economy’s gross domestic product, or GDP.

GDP is the dollar value of everything produced in Australia over a certain period. You take the value of the iron ore dug up in WA, the cattle raised in QLD, the wine from SA, the legal advice given in NSW, and all the coffees sold in VIC — add it all up — and that’s GDP. The government has a team of economists and statisticians at the Australian Bureau of Statistics that performs the calculations and publishes the numbers.

You can also talk about GDP per capita. That is just where you divide GDP by the population.

GDP growth means the economy is producing more — or producing things that are more valuable — than in the previous period. For example, if GDP in 2025 is higher than in 2024, that’s economic growth. The same is true for GDP per capita growth.

What if GDP shrinks instead of grows? That’s a recession. Technically, it’s usually defined as two consecutive quarters of negative GDP growth — meaning the economy has shrunk for six months in a row.

Economic growth means we are producing more goods and services — more homes, more hospital care, more holidays, more of everything. And over time, more stuff usually means better lives: higher incomes, more jobs, better public services, and rising living standards. It’s because of growth that we all have mobile phones, when, at our age, our parents didn’t. It’s thanks to growth that there are enough hospitals to guarantee healthcare for all Australians.

A growing economy also provides governments with more revenue to spend on essential services, such as schools, infrastructure, and Medicare, without the need to raise taxes.

Not great - we have been growing pretty slowly for a while, and well below our long term average.

(That big dip in 2020? You’re looking at the impact of the COVID pandemic.)

And it looks even more grim when you look at GDP per capita growth (remember, that’s when we divide our GDP by our population) - that has been negative in the last few quarters.

Wait - how can you have positive GDP growth but negative GDP per capita growth? Well GDP is rising slowly, but the population is rising faster. So although the economy is growing, it might not feel like it. Because for the average person, the economy is actually shrinking.

Remember our lovely baker from last week, and the options they have if they want to produce more bread:

These are the drivers of economic growth: 1 - employment, 2 - investment, 3 - productivity. If you want to produce more stuff, you need to hire more people, build more machines, or be more productive.

Hopefully, the government’s productivity plan will translate into more growth, leading to a better life for everyone.

Good question - a common criticism of focussing on GDP growth as the main way we can tell if an economy is healthy is that it doesn’t account for how that growth is distributed, or what costs were incurred (not only financial, but environmental, social, political) in its creation. Even if we are creating more stuff, do we really care if it’s only improving the lives of rich people? Or if we destroyed the environment in the process?

These are legitimate criticisms. And they’re the reason we need to look at other indicators beyond just GDP. We can track how GDP is distributed by examining the changes in typical income for low-, medium-, and high-income earners over time. We can also track environmental sustainability by examining the share of renewable energy sources in the energy mix, for example. The key point is this: we don’t have to pick between growth, equality, and the environment, but we need to track them all.

As we approach tax season, I thought I’d resurface some of the “incredible” tax deductions the Australian Taxation Office released as a gentle reminder to all taxpayers that sometimes, that deduction sounds more convincing in your mind.

According to ATO Assistant Commissioner Rob Thomson said, “While a lunchtime dip might clear your head for work, swimwear for a truck driver is clearly not deductible”.

Hey, points for creativity.