As concerns about rising interest rates intensify, many voters are directing their frustration towards the Albanese government, believing that its fiscal policies are exacerbating inflation.
In a recent meeting, the Reserve Bank of Australia (RBA) announced an increase in the interest rate to 3.85 percent, which is expected to raise mortgage costs by approximately $1,200 annually for the average homeowner.
Data from a Sky News Pulse survey, conducted by YouGov from February 3 to February 9, reveals that voters hold both the federal government and the RBA accountable for this hike. Notably, 30 percent of respondents feel that the government is primarily to blame, while an additional 35 percent believe that responsibility is shared between the government and the RBA. In contrast, only seven percent attribute the rise solely to the RBA, and nine percent point fingers at banks and other lenders.
Among mortgage holders, the tendency to blame the government is even stronger; 32 percent single out the government, and 35 percent indicate that both the government and the RBA share the blame. Interestingly, voters who support Labor tend to be more lenient in assigning blame, with only 17 percent holding the government completely responsible compared to 49 percent of Coalition supporters.
These findings come on the heels of the RBA's decision on February 3 to increase the cash rate by 0.25 percentage points, marking the first rate increase since 2023. This adjustment was made in response to inflation rates climbing above the central bank's target range of 2-3 percent, with the Consumer Price Index (CPI) currently registering at 3.8 percent.
Treasurer Jim Chalmers has consistently pushed back against assertions that government spending has played a role in driving up interest rates, maintaining that the pressures are stemming from private sector demand. "The board’s statement does not mention government spending. It makes it very clear that the pressure on inflation is coming from private demand," Chalmers stated following the interest rate increase.
However, this perspective has been met with opposition from RBA Governor Michele Bullock, who asserted that government expenditure is indeed part of the inflation equation. When pressed by Liberal MP Simon Kennedy about the influence of government spending on the RBA's policy decisions, Ms. Bullock acknowledged its significance, saying: "It does, as does private. It’s part of aggregate demand." She further explained that certain government initiatives, such as energy rebates, can directly increase household spending, thereby affecting inflation.
In light of these developments, economists have increasingly advocated for stricter fiscal policies, warning that high levels of public spending could hinder the RBA’s efforts to manage inflation effectively. Shane Oliver, AMP's chief economist, recently remarked that "the best thing" the government could do to help reduce inflation would be to lower its spending. He noted, "You’ve got to go back to World War II to see public spending as a share of the economy around these levels." Historically, government spending has averaged about 22 percent of GDP since the 1960s; however, it surged to approximately 28 percent during the pandemic, with little sign of decrease even after lockdown measures were lifted.
Warren Hogan, managing director of EQ Economics, cautioned that if the government does not rein in its spending, the RBA may be forced to raise interest rates even higher. "If the governments of Australia do nothing, I think the RBA is going to have to take the cash rate above where it was a year ago — above 4.35 percent," he projected.
For those keen to stay informed, Sky News Pulse will unveil complete political polling data, including insights on primary votes and two-party preferences, at 5 a.m. on Wednesday. Be sure to visit SkyNews.com.au for the latest updates.
