Interest rate blueprint Peter Dutton can turn to

Peter Dutton, pictured in 2004, was Assistant Treasurer in the Howard government. Picture: AAP

This time next week the Reserve Bank of Australia will once again put the cash rate up. Mostly like by 25 basis points, and most likely not for the last time. The only reason rates didn’t rise in January was because the RBA board didn’t meet this month.

In fact, it’s highly likely rates will go up again in March, April and perhaps even in May, one week before Jim Chalmers hands down the budget.

Rates have already increased on eight consecutive occasions, the first time was during last year’s election campaign.

People forget that the cash rate was at a historic low, so it’s hardly surprising the only way was up. The problem is that people are more leveraged than they should be, carrying larger credit card debts than is ideal, and the Governor of the RBA gave Australians the strong impression that rates would not even begin to rise until 2024 at the earliest.

The global surge in inflation post Covid turned that prediction into false prophecy. Nations the world over are now prepared to risk recession to get inflation back under control.

Once upon a time governments were demanding banks lift lending standards, making it harder to get a loan. But Covid saw many measures designed to do just that loosened, and government policy shifted to encourage high leveraging, even among first home buyers.

For many Australians negative equity in their home awaits them. That is, declining house prices will soon mean that the size of some people’s mortgage is greater than the value of their property. That’s tough to handle, especially when the repayments have ballooned off the back of rising interest rates.

People need to take advantage of the ease with which you can move your mortgage to ensure they are getting the best rate possible. Banks value new customers much more than loyal existing ones, and now that rates are heading north a little effort shopping around can significantly reduce monthly repayments.

We are yet to see what effect rising interest rates have on the political landscape. While monetary policy is the preserve of the RBA, not the government, fiscal policy settings can also impact rates. And history tells us that the political class can and does use fear around rising rates for partisan advantage. Witness John Howard’s 2004 campaign theme against Mark Latham: who do you trust to keep interest rates low? Australians put their trust in Howard and the Coalition, after which rates quickly went up.

Peter Dutton was the assistant treasurer in the aftermath of the 2004 election win. He witnessed the way Kevin Rudd adroitly reminded voters that Howard “broke” his promise to keep rates low. Perhaps he’ll look to deploy a similar political narrative as we count down to the next election.

Peter van Onselen is a professor of politics and public policy and Network 10’s Political Editor