No, interest rates are not always higher with Labor
Opposition MP Karen Andrews has tried to blame the rising mortgage costs on the new Albanian government, saying interest rates are still higher under the Labor Party.
The allegation is false. Historical data shows that average mortgage interest rates were higher during some periods of Coalition government than during some Labor governments. Moreover, experts say that there is no obvious correlation between interest rates and the party of government in Australia.
The National Liberal Party MP’s claim was made in a video posted to her Facebook page on July 6.
“Interest rates are rising at the fastest rate since Labor took power in 1994… Interest rates are still higher under Labour,” reads the text of the video.
When contacted by AAP Fact Checka spokeswoman for Ms Andrews said the claim was based on historical data on lending rates (“Indicator Lending Rates – F5”) from the Reserve Bank of Australia (RBA).
The Reserve Bank Board sets base interest rates independently of the political process and takes no instructions from the government.
Ms Andrews’ spokeswoman said the variable rates for homeowners’ mortgages (column D) were the best measure of historical interest rates.
AAP Fact Check separately determined that the RBA’s historic variable home loan rates were the most appropriate measure of the claim, prior to the response from Ms Andrews’ office.
However, the data does not show that interest rates were “always higher under Labour”.
For example, rates were higher in the early 1980s under Malcolm Fraser’s coalition government than they ever were under the Whitlam Labor government of 1972-75 or the Rudd-Gillard Labor governments of 2007-2013.
Interest rates on claims were higher under Labor when the average over the entire term of office of each government is also in error.
AAP Fact Check calculated the average monthly interest rates under each government, based on the average average rate from the first full month in office until the month the government left office.
The Hawke/Keating Labor government has overseen the highest average home loan rates on record, averaging 12.7% throughout its term.
Mr Fraser’s Coalition government had the highest average rates with a monthly average of 10.6%, followed by Gough Whitlam’s Labor government with an average monthly rate of 9%.
The average rates under the John Howard Coalition government and the Rudd/Gillard Labor governments were nearly identical at 7.26% and 7.25%, respectively.
Isaac Gross, professor of economics at Monash University, said AAP Fact Check he didn’t think it was true that interest rates will always be higher or lower under the Labor Party.
“They (interest rates) are primarily determined by international factors beyond Australia’s control such as the pandemic, the GFC (global financial crisis) or the mining boom, regardless of the political allegiance in power to the time,” Dr. Gross said in an email. .
“Certainly the current Labor Government should receive no blame (or credit) for rising interest rates, as it has yet to have a chance to write a single budget.
“Governments can influence interest rates by running a budget deficit that pushes them up or a budget surplus that pushes them down, but this effect is usually small relative to other factors.”
Gabriele Gratton, professor of politics and economics at the UNSW Business School, said the interest rates demanded are always higher under Labor is “ambiguous”, but “in most conventional senses it is not not correct”.
“More importantly to me, even if true, would that mean Labor causing higher rates? In fact, it would be equally reasonable to assume that Australian voters prefer Labor at a time when rates interest are likely to be high,” he said. AAP Fact Check in an email.
Professor Gratton said the recent rate hikes were a consequence of macroeconomic conditions which strengthened in 2021, but were not sufficiently addressed at the time.
“A prudent government would have applied some restraint to the fiscal expansion policies that were in place to deal with the pandemic emergency. Alas, our government failed to do so, with the effect of increasing aggregate demand in a economy with supply constraints (due to the global logistical issues we still face, but also due to limits on immigration),” he said.
“The (Reserve) Bank is responding with the standard tool it has to keep inflation expectations low enough.”
Coalition MP Karen Andrews’ claim that interest rates are always higher under Labor is false. Historical data from the Reserve Bank of Australia shows that average mortgage interest rates were higher during some periods of coalition government than during some Labor governments. The statement is also false when the rates are averaged over each government’s term of office.
Experts said there was no clear correlation between the tiers and the political party in power.
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