Labor presses PM on interest rate increase

Australia’s governing Liberal-National coalition is on the defensive after the central bank raised interest rates for the first time in more than a decade, with the Labor opposition saying Prime Minister Scott Morrison must be judged for taking no responsibility when it comes to interest rate hikes, cost of living pressures, and stagnant wages.

The Reserve Bank of Australia on Tuesday raised the official cash interest rate from a historic low of 0.1 per cent to 0.35 per cent – the first rise since 2010 – ahead of the May 21 federal election.

Morrison responded yesterday by moving to freeze the deeming rate for almost 900,000 social security recipients. The deeming rate is the assumed rate of return on personal investments, set by the government for the purposes of calculating social security benefits.

Liberal campaign spokeswoman Anne Ruston said the freeze would provide greater financial certainty for older Australians.

Treasurer Josh Frydenberg said the timing of the official cash rate increase, weeks out from an election, ‘‘is what it is’’.

‘‘They are an independent Reserve Bank, and it’s not for me to criticise the board for the decisions that they take, and they’ve explained the decision,’’ he told the Nine Network yesterday. ‘‘The timing is ... as a result of higher inflation that we’ve seen both globally, but also here in Australia.’’

Morrison expressed sympathy with mortgage holders facing increased monthly repayments as a result.

Labor said that while there were international factors which influenced the economy, there were also domestic pressures the government could control.

‘‘Our issue with the prime minister isn’t that he doesn’t take responsibility for all of this,’’ shadow treasurer Jim Chalmers told the ABC He said the interest rate rise was the first of many challenges to come as the Reserve Bank also forecast increases to inflation.