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Federal election 2022: Interest rate decision looms as campaign ‘bombshell’

Bank bosses, homeowners and politicians are all on tenterhooks as they wait for today’s Reserve Bank decision on interest rates.

The anticipated rate hike would be the first increase in more than 11 years, though a handful of experts anticipate the RBA will continue its cautious approach and wait until later this month before moving.

Political strategists have described the decision as a “bombshell moment”, but on Monday Scott Morrison declared any rate rise was “not about politics”, reiterating that the RBA’s policy settings had helped Australia’s post-pandemic economic standing.

The Australia Institute executive director and political strategist Ben Oquist said any mid-campaign increase would play into Labor’s hands.

“The Opposition has been running a big campaign about cost of living and the fact that wages aren’t keeping up with prices and so to have that confirmed — one with a high inflation rate last week and now with higher interest rates this week, will really play into the narrative that they’ve set up during this election,” Mr Oquist said.

Prime Minister Scott Morrison.
Camera IconPrime Minister Scott Morrison. Credit: MICK TSIKAS/AAPIMAGE

The RBA has only once before raised rates during an election campaign — in 2007, less than three weeks before John Howard lost to Kevin Rudd.

Official interest rates have been at 0.1 per cent since November 2020 and have not risen since November 2010.

It was only last month that RBA governor Philip Lowe dropped “patience” from his explanation of decision-making and raised the prospect of interest rate increases this year. But Dr Lowe has repeatedly said half the rate rise equation is wages growth — and the next data on that is due on May 18, just three days before the election.

ANZ, NAB and Macquarie Bank all outline their half and full-year profit results this week and executives are sure to be quizzed about what any rate rise means for them, their institutions and their customers.

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