Australia election: Interest rates rise for first time in decade

Australia’s central bank has raised the country’s interest rates for the first time in more than a decade.

The surge will put additional strain on household budgets as Australia prepares for an election heavily focused on rising living costs.

The Reserve Bank of Australia (RBA) raised interest rates to 0.35% on Tuesday.

The move is intended to counter rising inflation, which is at a 21-year high.

RBA Governor Philip Lowe said although inflation has picked up faster than expected, unemployment is low and there are signs of improving wage growth.

It is time to “withdraw some of the exceptional financial support that has been made available to help Australia’s economy during the pandemic,” he said in a statement.

Although Australia’s economic outlook remains positive, Mr Lowe said further rate hikes are imminent.

The last time interest rates rose during an election campaign was in 2007, when it was widely believed that it adversely affected John Howard before he lost the government.

Prime Minister Scott Morrison dismissed suggestions that the decision would affect his chances of re-election on May 21.

“It’s not about politics,” he said. “It is not about me.”

Labor said the hike showed a “full-blown cost-of-living crisis” was developing under Mr Morrison’s watch.

For someone paying off a A$600,000 (£340,000; $426,000) mortgage – which is about average for an owner-occupier in Australia – the increase is about A$80 a month.

That’s the last thing Scott Morrison needs less than three weeks before the election.

It is another financial turning point after last week’s news that Australia hit a 21-year inflation high of 5.1%.

Keep in mind that the government’s campaign will depend on how well the economy has fared – how much it has recovered post-Covid.

But that picture is changing fast and painfully for Australians and the government.

For days, the prime minister has been trying to explain that the RBA’s decision has nothing to do with his government’s economic policies.

He blamed “the extraordinary global environment” of the Covid lockdowns in China and of course the war in Ukraine.

He stood in front of cameras holding a chart comparing Australia’s inflation rate to other developed nations to show how better off the country was.

But those who are struggling to pay rent and stay on top of their household bills are likely to see that leadership doesn’t take responsibility.

That may be a gift to the opposition campaign, but whoever wins on May 21 will face a frightened populace battered by the high cost of living and inadequate wages.