Today’s interest rate hike plays right into Anthony Albanese’s hands just three weeks out from the election, political analysts say.

Back in November Scott Morrison said petrol prices, electricity prices and interest rates would go up under Labor as he styled himself as a superior economic manager.

But his argument may be damaged by today’s interest rate hike to 0.35 per cent which will whack up mortgage payments for thousands of families – after inflation hit a 21-year high of 5.1 per cent. 

The last time interest rates rose during an election campaign saw Liberal PM John Howard (left) booted out of office after 11 years in 2007

The last time interest rates rose during an election campaign came just before fellow Liberal PM John Howard was booted out of office after 11 years in 2007.

Even though the RBA sets the rates independently, Mr Howard apologised to the Australian people.   

‘I don’t like it and I would say to the borrowers of Australia who are affected by this change that I am sorry about that, and I regret the additional burden that will be put upon them as a result,’ he said.

Mr Morrison has dismissed parallels with Mr Howard, pointing out that interest rates were above six per cent in 2007 and before today were at a historic low of 0.1 per cent.

He has fairly blamed global supply chains and war in Europe for inflation and insisted that Australia’s economy is better placed than comparable wealthy nations.

But voters will be experiencing rising grocery bills and now rising mortgage payments when they enter the ballot box on May 21.  

Prime Minister Scott Morrison visits Palamara Village Fruits on Day 23 of the 2022 federal election campaign in Melbourne

Prime Minister Scott Morrison visits Palamara Village Fruits on Day 23 of the 2022 federal election campaign in Melbourne

Mr Albanese has blasted the Coalition for implementing policies to keep wages low over the past nine years and insists that only he has a plan to deal with cost of living pressures.

Labor will make childcare cheaper, make changes to industrial relations laws to push up wages and claims its energy policy will bring power bills down – although this is contested.

Mr Morrison’s spin doctors say the interest rate rise will help the Coalition by focussing minds on the economic headwinds ahead. The Coalition traditionally sees the economy as its core strength. 

But analysts doubt voters feeling the pinch will see it this way.  

‘This is a full blown cost of living crisis on Scott Morrison’s watch and now interest rate hikes are part of the pain,’ said shadow treasurer Jim Chalmers.

Reserve Bank shocks Australia by increasing interest rates by a QUARTER of a per cent with another SEVEN to come this year in huge blow to the PM and EVERY homeowner: Here’s what the first rise in 11 YEARS means for you 

By Stephen Johnson 

The Reserve Bank of Australia has raised interest rates for the first time in 11 years to curb soaring inflation – surprising financial markets with a bigger than expected increase.

The cash rate has risen by 0.25 percentage points, ending the historic era of a record-low 0.1 per cent cash rate and marking the first increase since November 2010.

This was also much bigger than the 0.15 percentage point rise financial markets were expecting, threatening the re-election hopes of Prime Minister Scott Morrison ahead of the May 21 poll.

The official rate now stands at 0.35 per cent – the highest since March 2020 at the start of the pandemic – after inflation in the year to March soared by 5.1 per cent – the fastest pace in 21 years.

The central bank move is also the first during an election campaign since November 2007, when former Liberal prime minister John Howard lost power.

Governor Philip Lowe said:  ‘The economy has proven to be resilient and inflation has picked up more quickly, and to a higher level, than was expected.’

The Reserve Bank of Australia has raised interest rates for the first time in 11 years to curb soaring inflation (pictured is an auction at Hurlstone Park in Sydney)

The Reserve Bank of Australia has raised interest rates for the first time in 11 years to curb soaring inflation (pictured is an auction at Hurlstone Park in Sydney)

Three of Australia’s Big Four banks – ANZ, Westpac and NAB – are expecting the Reserve Bank to take the cash rate to two per cent by 2023 as rates increase seven more times, with more pain possibly coming in June.

Dr Lowe is also expecting the era of low wages growth that began in mid-2013 to be over this year, after last year declaring weak pay increases could help the RBA to keep rates on hold until 2024 ‘at the earliest’.

‘There is also evidence that wages growth is picking up,’ he said.

‘Given this, and the very low level of interest rates, it is appropriate to start the process of normalising monetary conditions.’

More than 1.5million borrowers will be coping with a variable increase for the first time as monthly repayments on a typical $600,000 mortgage rise by $78.

St George, owned by Westpac, was the first bank to hint at an increase in variable mortgage rates.

‘We are currently reviewing our variable interest rates following the RBA’s cash rate decision,’ it said.

‘We will keep you up to date with any changes here.’

The cash rate has risen by 0.25 per cent basic points, ending the historic era of a record-low 0.1 per cent cash rate and marking the first increase since November 2010. This was also much bigger than the 0.15 percentage point rise financial markets were expecting

The cash rate has risen by 0.25 per cent basic points, ending the historic era of a record-low 0.1 per cent cash rate and marking the first increase since November 2010. This was also much bigger than the 0.15 percentage point rise financial markets were expecting

Last month, the RBA predicted an increase in the cash rate to two per cent – a level unseen since May 2016, would cause a 15 per cent plunge in Australian property prices.

CoreLogic research director Tim Lawless is expecting Sydney and Melbourne house prices to dive by 15 per cent in the year ahead, as interest rates keep rising.

‘Most of the declines will be concentrated in those two cities because that’s where affordability is most stretched and also where, arguably, they’ll be facing some demographic headwinds just through interstate migration really favouring the smaller states,’ he told Daily Mail Australia.

‘The counter argument to that is we see overseas borders opening up, we’re going to be seeing more migration coming in but that generally tends to flow through to rental demand rather than purchasing demand.’

Brisbane, Adelaide, Hobart and Canberra, along with regional areas in coastal New South Wales, southern Queensland and northern Tasmania were likely to see smaller declines of five to 10 per cent.

‘These markets tend to be a little bit more insulated partly because affordability is not quite as stretched,’ Mr Lawless said. 

Those markets are more affordable than Sydney and Melbourne and would continue to benefit from professionals who can work from home moving there. 

A 15 per cent fall in Sydney’s median house price of $1.417million would take values back to $1.204million – where they were in the middle of last year.

A drop of the same magnitude in Melbourne would see the mid-point house price drop from $1.001million to $850,787, which would be the lowest level since May 2017.

But with unemployment at just 3.95 per cent, the lowest level since 1974, Mr Lawless said forced sales would be unlikely.

‘This will probably more a lack of demand and people looking to sell having to adjust their price expectations,’ Mr Lawless said. 

A 0.25 percentage point increase will see monthly repayments on a typical $600,000 mortgage to climb by $78, from $2,306 to $2,384.

That’s based on a bank passing on in full the RBA increasing, pushing up a popular variable rate from 2.29 per cent to 2.54 per cent. 

How much THIS interest rate rise will cost you

$500,000 : Monthly repayments rising by $65 from $1,922 to $1,987

$600,000 : Monthly repayments rising by $78 from $2,306 to $2,384

$700,000 : Monthly repayments rising by $90 from $2,691 to $2,781

$800,000 : Monthly repayments rising by $103 from $3,075 to $3,178

$900,000 : Monthly repayments rising by $116 from $3,459 to $3,575

$1,000,000 : Monthly repayments rising by $130 from $3,843 to $3,973

Data based on variable rate increasing from 2.29 per cent to 2.54 per cent

 



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