For the first time in more than a decade, Australia’s central bank has hiked interest rates. As Australia prepares for an election that will be primarily focused on the rising cost of living, the increase will put additional strain on household budgets.
On Tuesday, the Reserve Bank of Australia (RBA) increased the cash rate to 0.35 per cent. The measure is intended to counteract increasing inflation, which is at its highest level in 21 years.
Although inflation has accelerated faster than projected, unemployment was low, and there was evidence that wage growth will improve, according to RBA Governor Philip Lowe. In a statement, he said it was time to withdraw “some of the exceptional monetary support that was put in place to strengthen the Australian economy throughout the pandemic.”
Despite the fact that Australia’s economic forecast remains positive, Mr Lowe believes that further interest rate hikes are on the way.
The last time interest rates rose during an election campaign was in 2007, when it was widely assumed that it would hurt John Howard’s chances of winning the election. Prime Minister Scott Morrison downplayed claims that the decision will hurt his re-election chances on May 21.
“It’s not about politics,” he said. “It’s not about me.”
On Mr Morrison’s watch, a “full-blown cost of living crisis” has evolved, according to Labor.
The hike will be about A$80 per month for someone paying off a A$600,000 ($426,000) mortgage, which is about normal for an owner-occupier in Australia.
With less than three weeks till the election, this is the last thing Scott Morrison needs. It’s yet another financial shock after last week’s announcement that Australia’s inflation rate had reached a 21-year high of 5.1 percent.
Remember that the government’s campaign is based on the economy’s performance, namely how well it has recovered since Covid. For Australians and the government, however, this picture is rapidly and cruelly changing.
The prime minister has spent days emphasising that the RBA’s decision has nothing to do with his government’s economic policies. He attributed the Covid lockdowns in China to “the exceptional global situation,” as well as the turmoil in Ukraine. He stood in front of the cameras, holding a chart comparing Australia’s inflation rate to that of other wealthy countries, to demonstrate how much better off the country was.
Those struggling to pay their rent and keep up with their household expenditures, on the other hand, will likely see a leadership unwilling to take responsibility.
This may be a boon to the opposition’s campaign, but whoever wins on May 21 will face an apprehensive public reeling from high living costs and incomes that have fallen short of expectations.
(Adapted from WionNews.com)