John Howard might not be a racing man but he took a huge punt when he postponed the election until after Melbourne Cup Day. He gambled his Prime Ministership on the Reserve Bank Board not putting up interest rates on the same day that most adult Australians will be having a dollar or two on something running over 3,200 metres.

The form experts reckon the PM is on a loser. The consumer price index figures out yesterday saw the interest rate futures market price in a 0.25 percentage point as being a virtual certainty.

Bookmakers will not be the only ones on 6 November hoping that the favourite gets beaten! 

The Government is already sensitive about interest rates. This advertisement from the last election is already haunting enough.

Factor in another interest rate rise – there have already been five since the last polling day – and John Howard’s credibility will be severely damaged.

Pinocchio will be resurrected in the Labor Party’s advertisements. Treasurer Peter Costello, who yesterday was trying to threaten banks into not putting up housing mortgage rates just because it was costing them more to borrow the money that they lend on, will wish he had had the courage to retire to the backbench before the disaster happened.

Favourites we should remember, even very short priced ones like an interest rate rise currently is on the futures market, do get beaten. The Reserve Bank might find other reasons to leave rates where they are.

But even if they do so, damage will be done to the standing of the Coalition. All the writing and talk about the inevitability of another rates rise in the near future will get through to the public over the next month.

It will be a mighty effort if the Coalition can hold on to government from here.

Not that the betting markets yet reflect the size of the task. Betting on the election is back to where it was when the election campaign started with the the Owl’s Election Indicator showing the Coalition a 33% chance of winning with Labor rated a 67% chance.

That was the position before Prime Minister John Howard announced 24 November as the election date. The probability of a Coalition win rose to 43% following the release of the Coalition tax plan early in the campaign but Labor has come back following its own future tax proposals, a good performance by Kevin Rudd in the debate and a favourable Newspoll.

When people digest the significance of the news about inflation I expect the odds for Labor to shorten considerably.

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