Labor and the commentariat are very excited about interest rates – what with a broken promise to keep them low and the possibility of rates going up during a campaign. But as with household finances generally, do the voters have a sense of perspective that the political class lacks?
Back in August, Andrew Leigh wrote an op-ed suggesting that interest rates did not affect the 2004 election in the way conventional wisdom presumes. Today’s Newspoll suggests that the 2007 election may be similar.
In a question asking whether the respondent would be less likely to vote for the Coalition if interest rates went up, only 9% said it would. That was largely driven by people who had already said they were going to vote Labor. Only 2% of those indicating support for the Liberals said that they would be less likely to vote Liberal if rates went up. But 4% of Coalition supporters said that they would be more likely to vote for the Coalition, as did 2% of Labor voters.
Assuming those respondents knew what they were saying, their answers highlight a point usually neglected in interest rate discussions. That is that people without mortgages but with savings benefit from higher interest rates. That would include a lot of people who usually vote for the Coalition, such as the ‘self-funded’ retirees.
While some households with mortgages will struggle if rates go up again, the proportions suffering ‘mortgage stress’ are greatly exaggerated. Most people would have borrowed understanding that rates would go up and down over a 25 year timeframe.
And for the Coalition, the upside of people giving them less credit for economic good news may be that they get less blame for economic bad news.
We’ll see how the polls react when, as is expected, the RBA puts up rates early next month. But I anticipate that, like many of the other turning points predicted by the commentariat, it will produce no significant or lasting change in the two-party preferred.