RBA rate rise puts pressure on Coalition ahead of Election

The recent Reserve Bank of Australia interest rate rise won't make it any easier for the Morrison Government to get re-elected, writes Tarric Brooker.

IN THE last Newspoll prior to Prime Minister Scott Morrison calling the upcoming Federal Election, Labor led the Coalition 53% to 47%. In the four weeks since, the developments of the campaign have left the polls in pretty much the same position as they were when the contest started, in two-party preferred terms.

Based on this result there is quite the mountain to climb for Prime Minister Scott Morrison and the Coalition in order to repeat their comeback in the 2019 Election. But with independents and third parties polling very strongly, particularly in electorates where they have received support from political fundraising group Climate 200, the picture for the Coalition is arguably even more challenging than the headline polling suggests.

In the blue ribbon seats of Kooyong and Goldstein, incumbents Treasurer Josh Frydenberg and Tim Wilson have both recently received polling results that suggest their seats are well and truly up for grabs in their contest with independent challengers, Monique Ryan and Zoe Daniel.

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The first RBA rate rise in 11 years

On Tuesday, prior to the Reserve Bank of Australia rate announcement, ANZ’s consumer confidence index fell by 6% to its lowest level since late 2020. ANZ concluded that the result was primarily driven by the recent acceleration in headline inflation to 5.1% and the associated increase in the likelihood of rate rises by the RBA.

To put the current state of consumer confidence into perspective, excluding 2020, confidence is at its lowest level in at least 12 years, despite the upbeat headline GDP and unemployment data.

Despite this dour outlook from households, the RBA raised interest rates this week by 0.25%. Most predictions had been for a 0.1% rise, so the move came as something of a surprise.

While an interest rate rise during an election campaign would always present a challenge to the incumbent party, as John Howard found out the hard way during the 2007 Election, the atmosphere is complicated by the fact that this is the first rate rise in 11 years.

Never before have Australian borrowers gone so long without seeing rising rates. The Coalition may also end up on the receiving end of some frustration households feel toward the RBA.

As late as October last year, RBA Governor Philip Lowe was sticking to his guns that interest rates wouldn’t be lifted before 2024. Now just seven months later, it’s not hard to imagine that some borrowers might be more than a little bit annoyed with the RBA.

This hasn’t given borrowers much time to prepare to experience something that they were told was years away.

Prime Minister Scott Morrison sees things rather differently, claiming that Australians had been preparing for a cash rate rise “for some time”.

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Labor immediately jumped on the rate rise as part of its campaign based on the Morrison Government’s management of the cost of living, with Shadow Treasurer Jim Chalmers remarking:

"If only you could pay your mortgage with Scott Morrison's excuses."

The first RBA rate rise in 11 years has put the Morrison Government in an even more challenging position, as concerns about rising rates continue to build and the Government’s economic management credentials are queried.

With Labor leading the Coalition in terms of the primary vote and by 53% to 47% in two-party preferred terms, it's seemingly Anthony Albanese’s election to lose.

But with two weeks still to go, we can expect the Morrison Government to keep trying to somehow repeat its miracle 2019 election comeback until polling closes on election day.