On Tuesday, Australian Prime Minister Scott Morrison was struck an election blow as the country’s central bank raised interest rates in the midst of a difficult campaign, potentially raising living costs and harming his party’s chances in the polls.
The Reserve Bank of Australia (RBA) raised its official cash rate to 0.35 percent from a record low of 0.1 percent in an effort to curb soaring inflation and warned that more tightening was on the way.
Morrison, who is behind in polls ahead of a national election on May 21, said Australians have been ready for a rate rise “for some time,” but admitted the choice will be tough for some.
Because of the rate increase, millions of Australians will have to pay more for their mortgages for the first time since 2010. Cheap loans fueled a housing boom last year, which was a boon to household wealth and consumer confidence, but it also exacerbated affordability issues.
With inflation growing twice as fast as wages, real earnings are falling, putting pressure on Morrison’s Liberal-National coalition, which has a one-seat majority in parliament. Labor, the center-left party, is leading in the polls.