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Ghosts of elections past prove rate cuts are not always a polling panacea

Anthony Albanese and Jim Chalmers – both students of modern political history – should not tie their electoral fortunes to a likely pre-election rate cut.

Election-year rate cuts and hikes have had mixed and/or often minimal impacts on the results of elections tracing back to the 1990s.
Election-year rate cuts and hikes have had mixed and/or often minimal impacts on the results of elections tracing back to the 1990s.

Anthony Albanese and Jim Chalmers – both students of modern political history – should not tie their electoral fortunes to a ­likely pre-election rate cut.

Election-year rate cuts and hikes have had mixed and/or often minimal impacts on the results of elections tracing back to the 1990s.

A first Reserve Bank rate cut since November 2020 would give Albanese, Chalmers and households cause to breathe a temporary sigh of relief but the deep-seated cost-of-living crisis and elevated insurance, mortgage, ­energy, grocery and living costs ­remain.

With Australians still reeling from the biggest collapse in living standards on record and the economy puffing fumes, Chalmers on Wednesday acknowledged the “fight against inflation is not over yet”.

Applying caution is smart. If and when the RBA cuts the 4.35 per cent cash rate, the government should avoid going overboard with celebrations.

In the event Albanese runs full term to May 17, which is unlikely, the RBA will have two opportunities to cut rates on February 18 and April 1.

Reserve Bank ‘should not be fooled’ by Labor’s ‘trickery’: Chris Kenny

The RBA’s preferred under­lying inflation measure, which fell to a three-year low of 3.2 per cent in the year to December, has fuelled expectations of an imminent move by the central bank.

In the 12 months preceding the September 2013 election, there were four rate cuts that lowered the cash rate to 2.5 per cent. ­Despite the flurry of rate cuts and Kevin Rudd turfing out Julia Gillard in revenge, the ALP was dumped from office in Labor’s annus horribilis.

After inheriting the 90 seats won by Tony Abbott in 2013, Malcolm Turnbull’s disastrous 2016 election saw the Coalition lose 14 seats despite an interest-rate cut in the middle of the campaign.

RBA records show the central bank has increased rates 12 months out from an election only four times – three of those occurring under Coalition governments and one under Labor.

Despite six rate hikes a year out from the 2010 election and the knifing of Rudd, Gillard still ­managed to return Labor in a minority government after making deals with independents and Greens ­following a 72-72 seat deadlock with Tony Abbott.

While some political analysts talk-up the impacts of 2022 and 2007 election campaign rate hikes, most would acknowledge that Scott Morrison and John Howard were on track to lose government.

The fight against inflation is 'not yet over': Jim Chalmers

The 2022 election campaign rate hike moved the RBA’s record low, pandemic-era cash rate from 0.1 to 0.35 per cent. The first rate hike since 2010 was followed by 12 rate increases under the Albanese government.

The five interest rate cuts in the 12 months before Howard’s 2001 election win likely helped buttress the Coalition’s economic credentials but concerns over national security in the wake of the September 11 terror attacks were dominant in the minds of voters.

A series of big rate cuts – including two in the year before the 1993 election – helped Paul Keating lower sky-high cash rates but the once-in-a-lifetime political gift that was John Hewson and his “birthday cake” was likely a bigger determinant of the result.

The political challenges and circumstances facing Australians in 2025 are vastly different from 10, 20 and 30 years ago.

Cost-of-living and housing crises, along with the failed Indigenous voice referendum, have fuelled a dramatic plunge in voter support for Labor and Albanese.

Amid expectations of a hung parliament result, Albanese will hope that a rate cut provides some bounce back for Labor and a launching pad to call an election.

Chalmers, who is going through the process of preparing a scheduled March 25 budget, on Wednesday doused suggestions he could deliver a third, election-eve surplus.

If a March or April election is called, the budget is off.

Read related topics:Anthony Albanese

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Original URL: https://www.theaustralian.com.au/nation/politics/ghosts-of-elections-past-prove-rate-cuts-are-not-always-a-polling-panacea/news-story/a3cfa84ba21c6601db98c4062bf93882