Wednesday’s 0.25 percentage point rise to 6.75 per cent is the first ever during an election campaign and has raised speculation it could prove the final nail in Howard’s political coffin come polling day on November 24.
With a booming economy influencing record numbers of Australians to buy their first home, the issue of interest rates is politically sensitive.
The rate rise will add an extra A$50 ($47) a month to an average A$300,000 mortgage.
Nick Economou, a political analyst, said the political problem for Howard is that “he made a big deal about interest rates in the 2004 election. He was the one who gave this very strong message about interest rates”.
|Rudd says Australians have
lost trust in Howard [AFP]
Howard himself said he sympathised with homebuyers who would be hurt by the rate rise.
“I would say to the borrowers of this country who are affected by this change, that I am sorry about that,” Howard told a news conference.
“I regret the additional burden that will be put upon them as a result.”
But he said he maintained that interest rates have been lower under his coalition Liberal-National government than the previous Labour government.
“What I indicated in the last election campaign is that I believed our policies would keep interest rates lower than Labour and that is still my view,” he said.
“If Labour wins this election, interest rates will be higher than if the coalition wins.”
Kevin Rudd, the Labour leader who is on track to defeat Howard, says Australians have lost trust in the prime minister.
“So at the last election Mr Howard says to the Australian people ‘trust me on interest rates, they won’t go up’.
“Six interest rate rises later he turns around and says to the same people only he can be trusted on interest rates,” he said.
The issue of trust will be a top priority for voters when they cast their ballots in a little over two weeks.
However, a poll published earlier this week found only 12 per cent of voters would blame Howard for a rate rise, with 67 per cent saying it would be either the economy or international factors that would drive the central bank’s decision.
Howard has made strong economic management and A$34bn of tax cuts the central planks of his election campaign.
And Al Jazeera’s correspondent in Australian, Dan Nolan, says that although Rudd continues to have a commanding lead in opinion polls, Howard is still trusted by most as a better economic manager and still has a chance.