Australians are bracing for a rise in interest rates after figures on Wednesday showed annual inflation surged to 5.1 per cent as of the March quarter, its highest level in over two decades and up sharply from 3.5 per cent three months earlier.
Importantly, annual underlying inflation – which smooths out volatile price swings and is more crucial to the interest rate outlook – also jumped to 3.7 per cent, its highest result since 2009.
It is well above the RBA’s two to three per cent inflation target.
Financial markets are fully pricing in the risk of a 0.15 per cent increase in the cash rate to 0.25 per cent when the RBA board meets next Tuesday, and see further increases in coming months.
Three of the four big banks predict the Reserve Bank of Australia will raise the cash rate next week.
If correct, it would be the first-rate hike in an election campaign since 2007, a poll former Liberal prime minister John Howard went on to lose.
Morrison said he respects the independence of the RBA and it will need to make its judgment in the best interests of the Australian economy.
But he played down comparisons to Howard’s election loss in 2007.
“We’re in the middle of a global pandemic, with a war in Europe. Those situations were not in place in 2007. I think everyone would understand that,” Morrison told reporters in Cairns on Thursday.
He said households were provided with a “shield’ in last month’s budget by halving fuel excise for six months, providing one off payments to welfare beneficiaries, as well as a temporary increase in the tax offset for low income earners.
He also pointed to the strength of the economy under his government, which has seen the unemployment rate fall to a near 50-year low of four per cent.
But shadow treasurer Jim Chalmers said the latest inflation figures have “absolutely torpedoed” Morrison’s claims on economic management.
“It is not good economic management if Australian working families can’t get ahead and they can’t get ahead under this government,” he told the Seven Network.
He later told ABC radio the prime minister has an excuse for everything but a plan for nothing.
“When things are going well in the economy, he takes all of the credit, when things are difficult for Australian working families – as they are now – he takes none of the responsibility. I think that drives people wild,” Chalmers said.
Labor’s economic plan, if it wins office, would include an audit of “waste and rorts” as well as crackdowns on multinational companies avoiding tax in a bid to make $5 billion in budget savings.
Morrison started Thursday campaigning in Cairns, in the marginal Liberal seat of Leichhardt which is held by 4.2 per cent.
Opposition Leader Anthony Albanese remains in isolation after returning a positive COVID-19 test last week, but will return to the campaign trail on Friday.
Labor frontbenchers continue to campaign in his stead, and will be in Sydney on Thursday.
Albanese will officially launch Labor’s election campaign in Perth on Sunday.
Local News Matters
Media diversity is under threat in Australia – nowhere more so than in South Australia. The state needs more than one voice to guide it forward and you can help with a donation of any size to InDaily. Your contribution goes directly to helping our journalists uncover the facts. Please click below to help InDaily continue to uncover the facts.