Albanese would be mad to justify a race to the election on this rate cut

Australians are finally seeing a glimmer of hope on household mortgages – and Anthony Albanese has a chance to use this moment to win back a jaded electorate.

The prime minister can point to the Reserve Bank decision on interest rates to persuade voters that the worst is over after three years of higher inflation, higher interest rates and slower wage growth.

But the good news is simply not strong enough to reverse the big gains Opposition Leader Peter Dutton has made over the past three years of economic pain – and that means Labor has a hard slog to polling day.

Albanese would be mad to justify a race to the election on this rate cut. He cannot expect Australians to be grateful for a single cut after a dozen rate hikes since the last election.

Treasurer Jim Chalmers was wise to this in his first press conference after the Reserve Bank decision. There was no celebration and no victory speech. Chalmers acknowledged that households remain under pressure, but he held out the promise of a “soft landing” from the hard times.

So the rate cut does not change the game in the political argument over the cost of living. At best, it changes the tone. Labor can breathe a sigh of relief, not cheer from the rooftops.

The rate cut should not be treated as a trigger for an election on April 5 or 12, even though those dates are technically possible. Labor insiders play down the idea of an election being called this weekend. There is still a case for a budget on March 25 if Labor feels the need to build on the good economic news before facing the voters at the ballot box.

That means an election in early May remains possible. It is merely a matter of a few weeks either way. As Chalmers said on Tuesday afternoon: “An election is more or less imminent”.

The shadow treasurer, Angus Taylor, had a telling line against any sense of Labor bravado from this decision. “The journey is far from over,” he said. His most powerful line is that Australians continue to suffer from a per-capita recession. The rate cut does not wipe that argument away.

So a single rate cut cannot be a game-changer in an election on the cost of living. Judging by the Reserve Bank’s language, nobody should bank on a second rate cut in April. At the very least, however, Labor has a chance to persuade voters that the hardest times are behind them.

Labor has had some good news on inflation. The consumer price index was 5.1 per cent just before Labor came to power three years ago, and reached 6.1 per cent in the June quarter of 2022. It then shot to 7.8 per cent in annual terms seven months later. It has tumbled since, despite the punishing headlines about household costs, and fell to 2.4 per cent in the final quarter of last year.

Yes, prices are still going up – but not at the horrendous pace we saw in recent years.

Labor has also had a glimmer of hope on wages. Workers have been earning less each year since the election, in real terms, because inflation outpaced their salaries. Things finally changed last year, with four quarters in a row when wages rose faster than prices. The growth in real wages was 0.7 per cent over a year – modest but positive.

Yes, many voters will rightly feel worse off since Labor came to power – but the government has a chance to convince them that a turnaround has begun.

Labor can breathe a sigh of relief, not cheer from the rooftops.

Interest rates finally falling. Inflation trending down. Real wages heading upwards at last. Albanese and Chalmers would be happy to fight on these economic facts after the past few years.

Dutton is watching his language on interest rates after getting his message wrong last week, when he raised an argument against a rate cut right now. “You can cut rates and then find that they’ve been cut too early, and then the Reserve Bank will have to increase rates later on,” he said. He sounded like he saw the need to prolong the pain.

He changed gear on Sunday. “Let’s hope they come down soon,” he said. At the same time, he has prepared for lower rates by going on the offensive on other fronts.

“It’s not just your mortgage rates, but it’s the price of groceries and it’s the price of electricity, and the price of gas,” he said on Monday. Those prices are up, of course, and the Reserve Bank decision will not change that.

This is the first rate cut since the depths of the pandemic, when the Reserve Bank trimmed the cash rate to just 0.1 per cent at the end of 2020. It kept it there for 18 months – and started lifting just before the last election. Labor came to power at the precise point the central bank had to put the squeeze on households.

Dutton has won the political debate on the cost of living for most of this term of parliament, mostly because he levelled a complaint without offering a solution. There’s a good case to argue that he gained an edge after the defeat of the Indigenous Voice in October 2023, when many voters felt Albanese was focused on the wrong issues. Now, closer to the election, it is about time Dutton set out an economic agenda to explain what he would do differently.

Albanese and Chalmers cannot win an election with one rate cut alone. But the conditions are finally more benign for Labor – and they have a chance to turn their fortunes around.

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