Dutton wrong to claim interest rates ‘always’ lower under Coalition
Source: Sky News
Opposition Leader Peter Dutton has falsely claimed that interest rates are always lower under the Coalition because it manages the economy better than Labor.
Experts say there’s no direct link between political parties and rates, and official statistics show rates are not “always lower” under the Coalition.
While government policy influences the independent Reserve Bank of Australia’s interest rate target, experts say it’s only one factor, and lower rates don’t necessarily indicate strong economic management.
Dutton claimed on the Gold Coast on March 11, 2025, after Cyclone Alfred struck the region.
“The Coalition always manages the economy better than Labor – that’s why interest rates are always lower under a Coalition government,” he said.
He had also made the claims earlier, in May and August 2024.
Dutton’s office didn’t respond to AAP FactCheck’s request for evidence to support his assertion.
Official statistics show interest rates are not always lower under the Coalition.
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The RBA’s official cash rate target, which affects the interest rates people pay on mortgages or other loans, stands at 4.1 per cent under this Labor government.
That is lower than at any point during John Howard’s Coalition government from April 1996 to December 2007.
It’s unclear if Dutton’s claim refers to the RBA’s cash rate target or market variable interest rates.
In 2022, AAP FactCheck debunked the Coalition’s claim about interest rates always being higher under Labor.
At the time, opposition MP Karen Andrews pointed to RBA historical data on variable rates for homeowners as evidence.
Those rates have also not always been lower under the Coalition.
Average monthly lending rates for owner-occupiers were 8.6 per cent in February 2025, which was lower than the 10.5 per cent at the outset of the Howard government in 1996, the data showed.
At the end of that Coalition government’s final term, rates were 8.6 per cent – higher than rates of about 5.8 per cent under the subsequent Labor government in 2009.
Sean Langcake, head of macroeconomic forecasting at research firm Oxford Economics Australia, said it was most relevant to compare interest rates after the early 1990s when many central banks, including the RBA, began targeting inflation.
The RBA, which is independent of the government, uses interest rates to try to ensure annual inflation sits between 2-3 per cent.
Langcake said inflation targeting makes comparing rates before and after that period difficult.
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“Prior to 1993 we didn’t have a policy authority doing inflation targeting,” Langcake said.
“Interest rates might have been much higher, but so were wages and so was inflation – it’s a completely different kettle of fish.”
However, historical data on monthly variable interest rates stretching back to 1959 indicated the claim was wrong.
Interest rates were higher than 10 per cent for several years under Malcolm Fraser’s Coalition government in the early 1980s – higher than much of the Whitlam Labor government in the mid-1970s.
Even averaging interest rates across each party’s whole time in office showed they have not always been lower under the Coalition.
AAP FactCheck calculated average monthly rates under every government from 1959 to the present.
The average rate of 10.6 per cent under the Fraser government between 1976 and 1983 was higher than the 9 per cent average under the Whitlam government that preceded it.
Interest rates averaged about 12.7 per cent under the Hawke and Keating Labor governments from 1983 to 1996, coinciding with inflation targeting from the early 1990s.
Isaac Gross, an economics lecturer at Monash University, said that irrespective of which party was in power, cash rate movements were often driven by factors separate from government.
He said those included the Covid-19 pandemic in 2020-21 and the global financial crisis in 2008-09.
“There is no clear link between political party and interest rates,” Dr Gross said.
“If [US President Donald] Trump’s tariffs cause a global recession, interest rates would fall, but not for a ‘good’ reason and not due to the actions of the Australian government.”
Government policies had a role in influencing interest rates, Langcake said, as cuts to government spending can lead to lower rates, while higher spending can lead to rates rising.
However, he said, each situation had trade-offs, referencing the decade to 2020 under the Coalition, when rates were lower but unemployment was also higher.
“What matters is the quality of government spending,” Langcake said.
Interest rates averaged about 5.2 per cent over the Coalition’s last term. The tail end of this period included the pandemic when the RBA dropped the cash rate target to a record low of 0.1 per cent.
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