Australia’s central bank has raised the nation’s interest rates for the first time in more than a decade.
The rise will put extra strain on household budgets as Australia prepares for an election that is heavily focused on the rising cost of living.
The Reserve Bank of Australia (RBA) lifted the cash rate to 0.35% on Tuesday. The move is designed to combat rising inflation, which is at a 21-year high.
RBA Governor Philip Lowe said although inflation had picked up more quickly than expected, unemployment was low and there was evidence wage growth would improve.
It was time to withdraw “some of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic”, he said in a statement.
Although the economic outlook for Australia remains positive, Mr Lowe said said further rises in interest rates were imminent.
The last time rates rose during an election campaign was in 2007, when it was widely seen to negatively impact John Howard before he lost government.
Prime Minister Scott Morrison dismissed suggestions the decision would impact his chances of re-election on 21 May. “It’s not about politics,” he said. “It’s not about me.”
Labor said the hike showed a “full-blown cost of living crisis” had developed on Mr Morrison’s watch. For someone paying off a A$600,000 (£340,000; $426,000) mortgage – which is roughly average for an owner-occupier in Australia – the increase will be about A$80 per month.
For days the prime minister has been at pains to explain that the RBA’s decision has nothing to do with his government’s handling of the economy. He blamed “the extraordinary global environment” of Covid-19 lockdowns in China and of course the war in Ukraine.
He stood in front of cameras holding a chart comparing the rate of inflation in Australia to other developed nations to prove how better off the country was. But those struggling to pay rent and keep on top of their household bills will likely see a leadership not taking responsibility.
This may be a gift to the opposition’s campaign, but whoever ends up winning on 21 May will face an anxious population reeling from high costs of living and wages that have failed to measure up.