Last week ACNielsen reported on the public’s retrospective view of interest rates, finding that 49% of its respondents thought interest rates would have been the same had Labor won, 31% thought rates would have been higher, 7% lower, and 13% couldn’t say. Today’s Newspoll results report on a prospective question:
John Howard or Kevin Rudd – who do you think is most capable of keeping interest rates lower?
The wording is a bit odd, lower than what? But again the biggest single group are those who can’t or won’t choose, 39% (22% neither + 17% uncommitted), followed by Howard on 34% and Rudd on 27%. Clearly Rudd’s 27% is a big improvement for Labor on the 7% who couldn’t imagine Mark Latham keeping interest rates down, but notably less than half of people (48%) intending to vote Labor were prepared to back Rudd on this issue. There is no significant Ruddmania here; with interest rates lower than they are now Kim Beazley scored 23% in a Newspoll in June 2006 (though the question was different; asking which party would better handle interest rates). It looks like most of the people who previously backed the Coalition in Newspoll surveys are heading to the undecided column rather than to Labor.
Noting the bad results on the interest rate survey, a slip in Coalition support on the which party is better to handle the economy question, and a decline in the PM’s satisfaction levels, Dennis Shanahan concluded that ‘the latest interest rate rise appears to have dented the Coalition’s economic credentials’.
That’s a perfectly plausible interpretation of what the public is thinking, but it highlights the limits of voters’ economic reasoning. A monetary policy framework that lets interest rates go up during an election is one of the government’s achievements. And increasing interest rates can be – and are in this case – a symptom of good economic performance, with strong demand on an economy already nearing capacity putting upward pressure on prices. To predict that interest rates might go down under a party may (unintentionally) be a criticism, that slowing economic activity as a result of its policies will encourage the RBA to try to boost the economy with lower rates.
Still, this is a problem that is more than a little of of the government’s own making. They have emphasised interest rates as a proxy of economic performance and competence. Now rising interest rates are obscuring some very good results in other economic indicators.