Anthony Albanese risks losing the next election if inflation remains high next year and interest rates rise again during Labour’s re-election campaign.
No government has been overthrown after a single term since 1931, during the height of the Great Depression.
But the Prime Minister’s Liberal predecessors, John Howard in 2007 and Scott Morrison two years ago, were defeated after the Reserve Bank raised interest rates during the final weeks of their campaigns.
The independent-minded RBA could strike again in early 2025 if inflation remains persistently high.
That means Labour’s re-election prospects could be threatened if it delivers too many inflationary benefits to voters in the upcoming 2024/25 budget and angers the Reserve Bank.
Anthony Albanese faces losing the next election if inflation remains high until 2025 and interest rates rise again during Labour’s re-election campaign (the Prime Minister is pictured with Treasurer Jim Chalmers and Jessica Rudd, daughter of former Labor Prime Minister Kevin Rudd).
Gov. Michele Bullock’s seven-year term began in September 2023, and if her predecessors Philip Lowe and Glenn Stevens are any guide, she would not hesitate to punish the political camp that appointed her to the position with a $1 million stipend. year. package.
Australia’s most powerful central banker has also declared she would raise rates again if inflation did not moderate as expected, even with the cash rate at a 12-year high of 4.35 per cent after 13 increases in less of two years.
‘If necessary, we will do it. “If we really think inflation is going to be persistent and significantly higher than our forecasts, we will adjust it again,” she said this week.
Labour’s revised stage three tax cuts for low and middle earners will provide more relief to full-time minimum wage workers on $45,906 and professionals on a salary of $120,000, compared to the previous Coalition government’s plan legislated in 2019.
Much of the financial aid will go toward paying bills, rent or a mortgage, especially for low-income people with incomes of $45,000 who receive $805 a year instead of nothing, as well as those with $120,000 who pocket $2,679 instead of $1,875.
But those who are not struggling will also have more money to spend on nights out, which could increase service inflation as prices of products such as vegetables, meat and shoes fall.
Headline inflation in the March quarter moderated to an annual rate of 3.6 percent, compared to 4.1 in the December quarter.
The bad news, however, was in the underlying measures of inflation without taking into account large price movements, whether up or down.
Gov. Michele Bullock’s seven-year term began in September 2023, and if her liberal-appointed predecessors, Philip Lowe and Glenn Stevens, are any guide, she wouldn’t hesitate to punish the political camp that appointed her to the job with a donation of 1 million dollars a year. annual remuneration package
The weighted median, centered on prices in the middle of the range, showed a 4.4 per cent rise in prices, a level well above the Reserve Bank’s 2 to 3 per cent target.
The Reserve Bank’s preferred trimmed average measure showed core inflation rising 4 per cent, based on average price movements of goods and services.
A rate hike becomes a bigger risk if the RBA believes inflation will not fall below 3 per cent by December 2025, according to its latest forecasts published this week.
The futures market has already ruled out a rate cut in 2024, but considers a rate cut in May 2025 possible, as long as the budget does not generate inflationary pressures.
For now, Ms Bullock has accepted Treasurer Jim Chalmers’ assurance that he is taking inflation seriously, suggesting Labor will likely focus on refunds for electricity and childcare bills rather than lump sum payments into the bills. voters’ bank accounts.
“What I want to point out is that the federal Treasurer, Jim Chalmers, says publicly, and says it to me privately, that he has inflation on his mind as he thinks about the Budget,” he said.
‘Budgets are very difficult, they are big balancing acts for governments.
“They have a lot on their plates and I think they are all aware that they want to help us beat inflation, so they don’t want to try to increase inflationary pressures, but we will have to see how the budget comes out.” Out like.’
Dr. Chalmers has promised to craft a budget that will not be inflationary as the economy slows.
“It will combat inflation without destroying the economy,” he said Friday.
“Responsibility and moderation will prevail.”
The last Labor Prime Minister re-elected during a serious cost of living crisis was Bob Hawke in March 1990.
He won a fourth term when headline inflation was 8.7 per cent and Paul Keating was an ambitious treasurer planning to become prime minister as Australia headed into recession.
The Prime Minister’s Liberal predecessors, John Howard in 2007 and Scott Morrison two years ago, were defeated after the Reserve Bank raised interest rates during the final weeks of the campaign.
The futures market has already ruled out a rate cut in 2024, but considers a rate cut in May 2025 possible, as long as the budget does not generate inflationary pressures.
But Hawke also benefited from an interest rate cut a month before the election, when the RBA cash rate was in a very harsh range of 16.5 to 17 per cent.
If Albanese is re-elected, he would be the first Labor prime minister in 35 years to win a second election.
However, a defeat would make him the first one-term election loser since James Scullin 94 years earlier, when the Labor primary vote was 31 per cent, only marginally below the level of 32.6 per cent he achieved in 2022.