Scott Morrison has played down the political implications of a looming interest rate hike as Labor prepares to pin blame on the Prime Minister if the Reserve Bank pulls the trigger at a meeting on Tuesday.
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Australia's central bank is tipped to raise the historic low cash rate of 0.10 per cent in an attempt to counter the soaring inflation which is pushing up prices across the economy.
Economists believe a possible May hike will spark consecutive raises by the RBA, with some believing the cash rate could rise above 2 per cent by 2024.
Speculation is mounting the RBA could raise the cash rate by 15 basis points on Tuesday, or completely unwind two of its pandemic slashes by 40 basis points.
On a $500,000 mortgage, that could either be a $39 or $104 increase in monthly repayments.
Westpac believes the cash rate is likely to sit at 2 per cent in May 2023, which would add $511 extra in interest per month.
RateCity research director Sally Tindall said borrowers should brace for multiple hikes in the coming months as the RBA continues to adjust monetary policy to deal with the above average inflation.
"The RBA is likely to lift the cash rate multiple times over the next six to 12 months as it works to bring inflation back under control," she said.
The prospect of a mid-election rate hike has framed the political fight over cost of living as the campaign passes the halfway mark.
Mr Morrison maintains the cost of living squeeze has been caused by factors outside the government's control, including the war in Ukraine and disrupted supply chains.
But Labor says the government is to blame and the Prime Minister's economic credentials are in "tatters" ahead of the central bank rate call.
The Reserve Bank hasn't raised interest rates during an election campaign since 2007, when Liberal prime minister John Howard was dumped from office.
Mr Morrison was on Monday downplaying suggestions a rate hike would harm the Coalition's chances in the May 21 poll.
"It's not about politics," Mr Morrison told reporters after visiting a retirement village in the marginal Victorian seat of Corangamite.
"What happens tomorrow deals with what people pay on their mortgages. That's what I'm concerned about. It's not about what it means for politics.
"It's not about me, it's not about Mr Albanese. It's not about the Treasurer, or the shadow treasurer. It's about Australians themselves and the the decisions they're making."
Mr Morrison praised homeowners who had payed down mortgages and "built up buffers" while interest rates were low in order to insulate themselves from an inevitable rate hike.
"Australians know that there are pressures on interest rates. That's why ... so many of them have been switching to fixed rates," he said.
"That's why many of them have been trying to get ahead of their mortgages to ensure that they're protected, and we've helped them do that."
The Reserve Bank made a series of interest cuts in the first year of the COVID-pandemic until they reached a historic low of 0.10 per cent in November 2020.
The rate has remained there ever since. Reserve Bank governor Phillip Lowe in February signaled a rate hike was "plausible" this year despite the threat of new variants.
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But after last week's consumer price snapshot showed inflation had soared to 5.1 per cent, well beyond the Reserve Bank's target range, the timetable for rate hikes was brought forward.
Labor treasury spokesman Jim Chalmers had earlier on Monday sought to weaponise the cash rate decision in an attempt undermine the Coalition's credibility on economic management.
"Whether the Reserve Bank raises interest rates this week or next month, Scott Morrison's economic credibility is in tatters," Mr Chalmers said.
"This is the third wave of Scott Morrison's cost of living crisis. This is a triple whammy of falling real wages, skyrocketing inflation, and interest rates are about to rise as well."