I have argued repeatedly that the Albanese government desperately needs the Reserve Bank of Australia (RBA) to cut interest rates to bolster its re-election chances.
The record decline in real household incomes and the ongoing cost-of-living crisis have negatively impacted Labor’s polling position.
Therefore, Labor needs the RBA to cut interest rates to regain voters’ confidence that the worst is over.
The latest Roy Morgan polling supports my argument, with Labor (up 2.0%) and the Coalition (down 2.0%) now level pegging on a two-party preferred basis at 20% apiece. This result was driven by the decline in trimmed mean inflation and the expectation that the RBA will soon cut rates.
Michele Levine, CEO of Roy Morgan, explained the result as follows:
“This week’s boost in support for the ALP came after last week’s lower-than-expected quarterly inflation estimate released by the Australian Bureau of Statistics (ABS) showed the Consumer Price Index (CPI) at 2.4% in the 12 months to December 2024, down 0.4% points from the previous quarter”.
“The closely watched ‘trimmed mean’ measure – which strips out volatile items such as food, energy, and petrol – dropped 0.4% points to 3.2% – its lowest since December 2021″.
“The falling inflation has raised hopes among many that the Reserve Bank will cut interest rates at its next meeting in mid-February. A cut to interest rates will provide relief to millions of mortgage holders around Australia that have endured 13 interest rate increases since early 2022″.
“The Albanese Government’s chances of re-election this year would be greatly enhanced if the Reserve Bank cut interest rates for the first time since November 2020 during the pandemic”.
Based on this polling, the election result would be a hung parliament and ‘too close to call’. The ALP or Coalition would require the support of minor parties and independents to form a minority government.
Financial markets expect the RBA to cut rates either in February or April, ahead of the election.
The RBA holds the key to the Albanese government’s re-election.
