Rate cut won't help Albo much

The RBA's decision to cut interest rates by 0.25 per cent this week should have come as no surprise in the current political climate, with an election looming and the Albanese Labor Government desperate to claw back some credibility.

But… the Reserve Bank is independent and doesn't succumb to political pressure, does it? That's the theory, but the facts could suggest otherwise. Several leading economists have declared it was the wrong move, which could add to inflationary pressures and virtually rule out any further cut when the board meets again in April.

The Australian Financial Review reported some of the comments leading up to the last meeting:

Labor backbencher Sam Rae declared on Monday "my community needs a cut."

Junior minister Matt Thistlethwaite said borrowers "deserve some rate relief" while Labor MPs Mike Freelander and Graham Perrett pushed for a jumbo 0.5 percentage point rate reduction.

Their demands followed months of calls for immediate cuts from Labor-aligned commentators including Craig Emerson, Ross Garnaut and Wayne Swan.

Even the big banks weighed in. … One former senior RBA official said they had never seen a pressure build-up like it…

Meanwhile, a leading economist claimed mortgage holders could face interest rate hikes later this year as a result of the RBA decision:

Judo Bank chief economic adviser Warren Hogan predicted a "disaster situation" unfolding because it's still too early for rates to come down.

Mr Hogan believes the RBA board risks driving up inflation before it's truly under control.

"It might sound attractive to a lot of Australians with mortgages to get a rate cut or two and save $50 a month in the short-term over the next six months, maybe even 12 months," Mr Hogan said.

"But if that puts at risk rates going up by a percentage point or two, and then having to come up with actually not just that $50 back, but then another $100 or $150, do they really want that $50 right now and then putting at risk that it's going to go up later?

Sky News host Sharri Markson called the rate cut "economically reckless" and perhaps "politically motivated".

Ms Markson suggested Reserve Bank Governor Michele Bullock "caved into" a marginal interest rate cut under sustained political pressure.

"Serious economists and former RBA officials have criticised the decision, which could worsen inflation and the cost-of-living crisis." She interviewed some outspoken experts:

But will the cut from 4.35 percent to 4.10 percent make much difference to Labor's electoral chances in the face of polls which continue to show a steady overall decline and lack of support for Prime Minister Anthony Albanese's leadership.

Considering it comes after 12 interest rises and a list of broken promises, I very much doubt it.

Regardless of whatever spin Treasurer Jim Chalmers and PM Albo try to put on the level of inflation, we all know how pledges such as a $275 annual reduction in electricity bills (repeated almost 200 times in the lead up to the last election) have panned out. Apparently that was just "aspirational" along with cost of living relief, mortgage relief, government transparency and "my word is my bond". We all know costs have gone through the roof, fanned largely by power prices which have risen by an average of $1000 and their flow-on effect on food prices and small business failures.