Karen Andrews
Liberal National Party MP Karen Andrews has posted a video blaming Labor for interest rate rises. Image by Lukas Coch/AAP IMAGES

No, interest rates are not always higher under Labor

William Summers July 20, 2022
WHAT WAS CLAIMED

Interest rates are always higher under a Labor government.

OUR VERDICT

False. Rates have been higher under coalition governments and experts say there is no clear correlation between levels and the political party in power.

Federal opposition MP Karen Andrews has attempted to push responsibility for rising mortgage costs onto the new Albanese government, claiming interest rates are always higher under Labor.

The claim is false. Historical data shows average home loan interest rates were higher during some periods of coalition government than during some Labor governments. Additionally, experts say there is no obvious correlation between interest rates and the party of government in Australia. 

The Liberal National Party MP’s claim was made in a video posted to her Facebook page on July 6.

“Interest rates are going up at the fastest rate since Labor was in power in 1994 ÔǪ Interest rates are always higher under Labor,” the video’s text reads.

When contacted by AAP FactCheck, a spokeswoman for Ms Andrews said the claim was based on historical lending rate data (‘Indicator Lending Rates ÔÇô F5’) from the Reserve Bank of Australia (RBA).

The Reserve Bank Board sets base interest rates independently of the political process and does not take instruction from the government.

Ms Andrews’ spokeswoman pointed to variable home loan rates for owner-occupiers (column D) as the best measure of historical interest rates.

AAP FactCheck separately determined the RBA’s historical variable home loan rates to be the most suitable measure of the claim, prior to the response from Ms Andrews’ office.

However, the data does not show interest rates were “always higher under Labor”.

For example, rates were higher in the early 1980s during the coalition government of Malcolm Fraser than they ever were during either the 1972-1975 Whitlam Labor government or the 2007-2013 RuddGillard Labor governments.

The claim interest rates were higher under Labor when averaged across each government's whole time in office is also wrong.

AAP FactCheck calculated average monthly interest rates under each government, based on the mean average rate from the first full month in power until the month the government left office.

The Hawke/Keating Labor government oversaw the highest average home loan rates on record, with the mean average at 12.7 per cent throughout its time in office. 

Mr Fraser's coalition government experienced the next highest average rates with a monthly mean of 10.6 per cent, followed by Gough Whitlam's Labor government with an average monthly rate of nine per cent.

Average rates during John Howard's coalition government and the Rudd/Gillard Labor governments were almost identical at 7.26 per cent and 7.25 per cent, respectively.

Isaac Gross, an economics lecturer at Monash University, told AAP FactCheck he did not think it was true that interest rates will always be higher or lower under Labor.

"They (interest rates) are mostly determined by international factors outside Australia's control such as the pandemic, GFC (global financial crisis) or the mining boom, regardless of what political stripe is in power at the time," Dr Gross said in an email.

"Certainly the current Labor government should receive zero blame (or credit) for the rise in interest rates as they have yet to have a chance to write a single budget.

"Governments can influence interest rates by running a budget deficit which nudges them higher or a budget surplus which lowers them but this effect is generally small compared to other factors."

Gabriele Gratton, a professor of politics and economics in the UNSW Business School, said the claim interest rates are always higher under Labor is "ambiguous", but "in most conventional senses, it is not correct".

"More importantly for me, even if it was true, would that mean that Labor causes higher rates? Actually, it would be equally reasonable to think that Australian voters prefer Labor in times in which interest rates are likely to be high," he told AAP FactCheck in an email.

Prof Gratton said recent rate rises were a consequence of macroeconomic conditions that picked up strength in 2021, but were not sufficiently dealt with at the time.

"A prudent government would have applied some brake to the fiscal expansionary policies that were in place to face the pandemic emergency. Alas, our government didn't do that, with the effect of increasing aggregate demand in an economy with supply constraints (because of the global logistic problems we still face, but also because of limits on immigration)," he said.

"The (Reserve) bank is reacting with the standard tool it has to keep inflation expectations low enough."

The Verdict

Coalition MP Karen Andrews' claim that interest rates are always higher under Labor is false. Historical data from the Reserve Bank of Australia shows average home loan interest rates were higher during some periods of coalition government than during some Labor governments. The claim is also false when rates are averaged across each government's whole time in office.

Experts said there is no clear correlation between levels and the political party in power.

False - The claim is inaccurate.

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