NICOLA SMITH: Much-hyped rate cut will renew speculation of early election

A long-awaited reprieve in interest rates may tempt Prime Minister Anthony Albanese towards calling an earlier election but he would be wiser to wait.

The Reserve Bank of Australia delivered the much-anticipated relief for mortgage payers – and embattled politicians - on Tuesday by cutting the official interest rate by 25 basis points to 4.1 per cent, marking the first reduction of the cash rate since 2020.

The first lowering of interest rates in almost five years will reignite speculation of a Federal poll being called before the final deadline of May 17. Rumours of an election on April 12, or as early as April 5, have already been rife.

The lower rate offers the tentative solace of an easing economic climate that may give Labor a lift in the polls.

But there would be a whiff of desperation in calling an early election solely on the back of one rate cut as the country still reels from a cost-of-living crisis impacting so many household budgets.

Opinion polls show the Government still has a mountain to climb to return to office for a second term, with the latest Newspoll showing the coalition leading 51 per cent to 49 on a two-party preferred basis. More than one rate cut is needed to turn these figures around.

As the cliche states - a week is a long time in politics.

Any brief psychological boost from today’s decision risks being eclipsed by global economic uncertainty after a surprise jump in US inflation and the looming spectre of punishing steel and aluminium tariffs in March, from which Australia has no guarantee of escape.

It will take some time for voters to feel the impact of today’s cut in their pockets and to dull the pain of 13 consecutive rate hikes, 12 under the current Government.

Labor needs more runway, and the possibility of a second rate cut in April, if it wants its economic electoral message of being a better steward of the economy - fostering lower inflation and unemployment, alongside higher wages - to make a further dent in voting intentions.

The longed-for rate cut has triggered a crescendo of hype akin to the moon landing and is welcome relief for struggling home owners, but in terms of impacting the election outcome, it is more likely to reflect the Shakespearean adage - “full of sound and fury, signifying nothing.”