Interest won't rate

As is all too common on the release of major economic news, or indeed major news of any kind, pundits have been quick to point to the likely impact on the Federal Government's electoral fortunes of this week's announcement of a rise in official interest rates by the Reserve Bank.

The truth is that it is highly unlikely that on its own it will have any impact on the standing of the government at the next federal election at all.

Remember that the federal election is not due and not likely to be held until late next year.

What usually happens with developments such as this that appear to have potentially adverse consequences for the government is that, if anything, they generate a small change in public opinion for a short period, which may be registered in the level of support for the government in the next couple of opinion polls, and then the status quo returns.

Long before an election occurs the interest rate rise will have been factored into the political landscape and will have no discernible impact.

Only if there were to be several sustained rises in interest rates in the lead-up to the election would it be likely that an issue such as this would really bite electorally.

But even then it needs to be remembered that there are many factors that go into determining people's votes at a general election. At best, any one economic or social issue has only a small part to play in that equation.

Historically, interest rates have not featured highly among the issues that motivate voting choices.

Two examples are the federal election of 1990 and the most recent election, in 2004.

In 1990 the Hawke Labor Government went to an election with interest rates at historically high levels of around 17 per cent.

But Australia had experienced a high interest rate environment for some years before that election, so as far people's reactions go, it is not as though interest rates suddenly jumped up to the high teens now.

Double figure interest rates were part of the economic and political context of the time.