Why the Reserve Bank’s rate rise is bad news for Scott Morrison

Scott Morrison has repeatedly argued that the interest rate rise “isn’t about politics” - but an unearthed clip from 2008 tells a different story.

Ignore the spin.

The bigger than expected rate rise announced by the Reserve Bank today is bad news for the Prime Minister Scott Morrison.

And the political threat of the rate hike was underlined by the archival footage that the Labor Party swiftly dumped online shortly after the news broke.

In his own words, during a speech to Parliament in 2008 on cost of living pressures, a fresh-faced Scott Morrison said when interest rates rise the Rudd government should be held accountable.

“You could argue that they were somewhat successful in prosecuting an argument that if interest rates were to rise, then the government should be accountable for those things, and as a result the government should not be elected,’’ he said.

“Well, if it’s good for them, it’s good for us. The government has created the expectation out there in the Australian community that it can control the revolution of the planets, that it can go out there and it can control the universe. It can control petrol prices. It can control grocery prices.

“So it is a fair thing - a very fair thing - for the people of Australia to hold this government to account for that pledge.”

Scott Morrison has argued the interest rate rise “isn’t about politics”. Picture: Jason Edwards

This morning, the Prime Minister was trying to argue that the interest rate rise “isn’t about politics.”

Of course it is, because it goes to the heart of the cost of living question that will decide how families vote.

And that’s why Labor’s treasury spokesman Jim Chalmers was ramping up the rhetoric.

“Scott Morrison’s economic credibility is now in tatters, it’s completely shredded,’’ he said.

“Everything is going up except wages and now interest rates are part of the pain.”

Labor has its own challenges to deal with - including news.com.au’s revelation today that the home ownership scheme it announced this week will involve an Albanese Government borrowing an extra $7 billion to fund that plan.

It said the scheme would “cost” $329 million but that’s just the interest and admin costs. It’s left out the details on how much it will need to borrow.

Of course, for the lucky Australians who can secure a place in the scheme it would provide a foot in the door of the property market. But it provides new lines of attack for the Coalition.

The Prime Minister’s message: now is not the time to “risk it” with Labor.

The Reserve Bank’s message: expect more pain to come.

It’s the first rate rise since November, 2010 and it was bigger than expected.

In his own words, during a speech (above) to Parliament in 2008 on cost of living pressures, Mr Morrison said when interest rates rise the Rudd government should be held accountable

Labor’s treasury spokesman Jim Chalmers said Mr Morrison’s “economic credibility is now in tatters, it’s completely shredded”. Picture: Tim Hunter.

RBA governor Phil Lowe insists the impending election had no influence on the board’s decision to raise rates. Indeed it would have been accused of politicisation if it did not increase rates given that headline inflation is forecast to hit 6 per cent.

And however unpleasant the economic medicine is, the RBA warns it’s the only responsible course.

“We have operational independence and it’s a testament to the political culture of Australia that independence is respected. We take our decisions in the best interest of the country: that is what we always do, and what we did today,’’ RBA Governor Philip Lowe said.

During his press conference today the Prime Minister was posed a brutal question.

“Has your government just lost the election?,” a reporter asked.

Mr Morrison scoffed before telling the reporter softly “Of course not”.

Australia will know if he’s right - or wrong - on May 21.