The Government’s decision to reframe the interest rate rise as a warning to the electorate to stick with the party they trust more to manage the economy is not a panic reaction but one that has been considered for some time.

On 12 February this year, Glenn Milne, generally regarded as Peter Costello speaking off the record, wrote in his column in The Australian that the Government was worried that Kevin Rudd’s fiscal conservatism would undermine the political advantage it derives from being seen by voters as the better economic manager.

Milne wrote:

No wonder Peter Costello is telling anyone who’ll listen, behind the back of his hand, that it might not be such a bad thing if the economy hits a few bumps. In the Treasurer’s eyes such a scenario would put some voter apprehension back into the election mix, reinforcing the need for superior — and above all proven — economic management.

As it is, Costello fears — perhaps rightly — that a benign and perhaps even positive interest rate climate running into the election, along with record low unemployment, could favour Rudd.

The Treasurer has now had his wish for higher interest rates fulfilled. It sits uneasily with the Government’s claim that it is deeply concerned about the impact of mortgage stress on working families.

It’s a cynical political calculation that now seems likely to backfire.

Perhaps the Treasurer should be careful what he wishes for.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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