Australian rate hike casts cloud over PM Morrison's re-election campaign

Australian Prime Minister Scott Morrison was dealt an election blow on Tuesday after the country's central bank raised rates in the middle of a tough campaign, which could further increase living costs and hamper his party's prospects at the polls.


Reuters | Melbourne | Updated: 03-05-2022 11:21 IST | Created: 03-05-2022 11:04 IST
Australian rate hike casts cloud over PM Morrison's re-election campaign
Australian Prime Minister Scott Morrison (File Photo) Image Credit: ANI
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  • Australia

Australian Prime Minister Scott Morrison was dealt an election blow on Tuesday after the country's central bank raised rates in the middle of a tough campaign, which could further increase living costs and hamper his party's prospects at the polls. The Reserve Bank of Australia (RBA) lifted its official cash rate to 0.35% from record lows of 0.1% in a bid to contain surging inflation and signaled more tightening to come.

Morrison said voters will understand any change in rates will be due to global events and not his government's handling of the economy as they go to polls on May 21. "The situation that Australia faces is a situation faced all around the world and I think Australians understand that," Morrison told reporters hours before the central bank raised interest rates for the first time in more than a decade.

The hike in rates means millions of Australians will have to cough up more money on their mortgages for the first time since 2010. Cheap loans fuelled a housing boom last year, a windfall for household wealth and consumer confidence, but that has also raised affordability concerns. With inflation rising twice as fast as wages, real incomes are in the red putting pressure on Morrison's Liberal-National coalition, which has a one-seat majority in the lower house of parliament. Center-left Labor is ahead in polls.

The last time RBA increased rates during an election campaign was in 2007, and then Prime Minister John Howard went on to lose both the vote and his seat. An ANZ survey out earlier in the day showed Australian consumer sentiment dropped 6% last week as high inflation numbers fuelled concerns about the cost of living.

Morrison blamed the war in Ukraine and the COVID-19 lockdown in China for the inflation shock but argued Australia was in a better economic position than many developed nations. "While cost-of-living pressures are very real and families are feeling them, it's far worse overseas," Morrison said.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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