Election 2022: The only interest in rates is the timing

The Reserve Bank building in Sydney. Picture: AAP

The worst-kept secret of the economy is that interest rates are going up.

Whether it is next week on the back of Wednesday's cheerless inflation numbers or the following month, there is only one direction in which they are heading.

The politics of a likely rate hike in the middle of an election campaign will doubtless inspire comparisons to John Howard’s folly of 2007.

The former PM had promised to keep interest rates low, only to be hit with a rate rise in the final weeks of the election campaign.

Some commentators at the time suggested this had been a pivotal moment in the election, which Howard went on to lose. But not before apologising to Australians for the additional financial hardship.

But, unlike then, homeowners shouldn’t be surprised if the Reserve Bank of Australia decides to rerun history next Tuesday.

The warnings of rate rises have been sounding for months.

The question is what such a move by the RBA will mean for Scott Morrison, whose campaign hinges on a superior economic platform.

On top of crippling cost of living pressures and low wage growth, Labor shadow treasurer Jim Chalmers has suggested it would deliver a third political whammy for the government – not to mention homeowners.

There are senior Liberals who argue, however, that a rate rise next week could be a net political positive for the government.

One senior minister went as far as to say privately: “I hope they do raise rates next week. They are going up anyway but better for us if they go up next week.”

The rationale being that a rate hike would elevate the salience of the economy as an election issue.

It will remind voters that there is no autopilot switch for the economy, and at its most basic level promotes the one issue in which the Coalition has the most political equity.

It will reinforce the message Morrison has been hammering, the fear of uncertainty, and the argument that Labor can’t be trusted to run the economy.

This may all be wishful thinking when on the two issues that Morrison would otherwise dominate – the economy and national security – nothing seems to be going his way. Outcomes are more important than rhetoric, and the outcomes so far have been negative.

That said, Labor’s 13-page economic blueprint and budget repair strategy released on Wednesday revealed just how scared it is of its own shadow.

Under normal circumstances a document like this should bolster the Coalition’s case against change.

For Anthony Albanese, it is clear that this was simply a box-ticking exercise framed around the hope that events will continue to turn against Morrison and the Coalition.