Australian Federal Election: What does it mean for interest rates?

Inflation in Australia has reached a record 21-year high, and experts say this could trigger a pre-election interest rate hike. If the Reserve Bank of Australia raises the official cash rate in early May, Scott Morrison will become the first prime minister to face an interest rate rise during an election since John Howard in 2007.

This would be a major blow to the government, which is already facing strong opposition from the Labor Party. Interest rates are a key issue for voters, and an increase could swing the election in favour of the Opposition. The government is desperately trying to avoid an interest rate rise, but with inflation soaring, it may be inevitable. The Reserve Bank’s decision could well determine the outcome of the election.

Last month, mortgage holders across the nation breathed a collective sigh of relief when the Reserve Bank Board decided to keep interest rates at a historic low of 0.1%. However, an interest rate rise is certainly looming on the horizon, and it could come sooner than expected.

As the recent economic data from Australia has shown, the country is facing an alarming inflation and consumer price spike. With prices already soaring across key sectors like housing and groceries, the Reserve Bank of Australia may see fit to increase rates to bring things under control. This would inevitably add financial pressure on households already struggling with rapidly rising living costs.

In addition, the affordability of housing is a major concern for many Australians. Over the past two years, there has been a significant increase in property prices, making it difficult for many people to enter the housing market. Consequently, the current slowing of price growth is welcome news for those who are struggling to afford a home. However, it is important to remember that the current slowdown is not due to increased interest rates. Instead, the massive price growth of recent years has finally hit affordability constraints. This means that although property prices are no longer increasing at an alarming rate, they are still relatively high compared to incomes. As a result, affording a home remains a challenge for many Australians.

If you have any variable rate loans, now is the time to start budgeting for a higher interest rate. Don't wait until it's too late to make a plan - get ahead of the game and stay one step ahead of the hikes.