Raising rates during an election campaign is a first for the Reserve Bank. What’s more, the rise breaks promises from the Coalition that they will keep interest rates low. But with inflation rising and continued uncertainty in the US subprime market, will voters take a risk on the relative inexperience of the ALP?
We took the question to the Crikey Cabbie Panel: Which party will benefit politically from the rate rise?
David Bradley, Sydney. The ALP will benefit. If people remember that Howard was the guy who claimed last time around around that he could control interest rates, then they’ll give the other mob a go. Claiming that they are better able to manage the economy in any tough times ahead is just the same line they have trotted out for the past few elections. I’ve heard it before and the sky hasn’t fallen. The fact is, interest rates have gone up and my business in real terms has gone down. If I were Macquarie Bank, I might feel differently. This means a five to 10% decrease in income for most cabbies over the next week or two, so the RBA has effectively handed me a pay cut. Howard went to the polls promising me he could minimise these, and now I’ve had six short term pay cuts. Howard can boast all he likes about the economy but that’s not what does my weekly shopping.
Bruce Tootell, Melbourne. People are so used to rate rises now it’s almost like having s-x with your wife. It’s everyday and not like having a stray at all. It’s normal. People have a general feeling that they’re poorer. I’m not saying that feeling’s true, but every now and then people get the feeling they are broke, but I don’t think this is going to cause a big shock for the Liberal Party. If you ask me, there’s a big surprise to come in this election campaign. The Libs are holding their best shots. It might be Kevin Rudd is wearing a rug. A good rug detector might pick it up. People trust Rudd. The race-goers in the back of the cab right now reckon it’s bad thing because it deprives them of betting money. They think Rudd is ok, but if Gillard and Tanner get their hands on the controls, the ALP is a risk. But let’s be sensible about it. Certain things are inevitable, age, grey hair, taxes, interest rate rises – that’s just life.
Alex Hryciw, Adelaide. Howard doesn’t have any control of interest rates. He can huff and puff all he likes, so can Rudd, but if the RBA wants to put interest rates up, up they go. In my game, any increase that John Howard gives to senior citizens or anyone else through tax cuts or handouts, I never see. I drive down the street and gas goes up 15c overnight. I can’t charge the people out there for it. I just have to wear the losses. Our insurance goes up, the cost of running the business goes up, and then Howard turns around and says I’ll give you $500. Well, that’s about a week’s worth of gas. People don’t like it when rates go up, but it’s just another cost for them and they’ll wear it. I don’t know if people think Rudd will be any different.
Ross Nelson, Sydney. It was completely anticipated so I don’t know if Labor will get any extra benefit from it. The whole question of rising interest rates is part and parcel of a whole lot of other things. It’s rising petrol prices, rising food prices. People are sick of being told how fantastic the country is doing when they personally are not. The average person is no better off than they were three years ago. In terms of which party benefits, I think people stopped listening to Howard months ago. Even though we are going to hear Howard and Costello are better financial managers ad nauseam until election day, I personally don’t believe they are better financial managers at all. What can they point to? They didn’t reform the economy at all apart from GST. Paul Keating did all of that. The ALP did all the painful things and the Liberal Party has basically reaped the rewards. I don’t think they have any claims to being great financial managers. More disturbing is that there are more rises to come.
Read more from our cabbies here.