Analysis: Rate rise was inevitable – but impact on the election is not

The Reserve Bank raising the cash rate will have some impact on the election, but not to the extent of 2007, writes Matthew Killoran.

Reserve Bank governor Philip Lowe made it clear that his decision was not political, but that doesn’t mean its impact won’t be.

Interest rates rising again were inevitable. They were at emergency levels for the pandemic and that emergency has passed.

But that doesn’t mean this was news Prime Minister Scott Morrison, or homeowners, wanted to hear less than three weeks before an election.

There are many people who will have purchased a home, at inflated prices, on earlier forecasts from the RBA that interest rates would not be raising until 2024.

But circumstances changed and interest rates went up and will again and again before the year is done, likely reaching 1.5 per cent.

With grocery prices on the rise, petrol prices edging back up despite the fuel excise cut, this is just one more pressure on the family budget.

The fact is, the are still at historically low rates and Dr Lowe said he had to move because the economy was doing well.

That will be cold comfort for many people.

A generation of homeowners who have never experienced a rate rise are going to have to learn to tighten their belts in the coming months and years.

Rate rise probably won’t be the biggest factor which determines the outcome of the election, just like it wasn’t in 2007 for John Howard.

But it will likely cost votes in a what is shaping up to be a very tight election race.

Originally published as Analysis: Rate rise was inevitable – but impact on the election is not