The fall in the ANZ-Roy Morgan consumer confidence index – a pointer to future household spending – was the biggest weekly drop since mid-January when the COVID-19 Omicron variant surged.

“The strong inflation result of 5.1 per cent was likely the primary driver of the drop in confidence as it increases the prospect of interest rate hikes by the Reserve Bank in the near future,” ANZ head of Australian economics David Plank said.

This was supported by confidence dropping 9.6 per cent among people “paying off their home loan”, while for people who already own their home or are renting confidence dropped by 4.7 per cent and 4.2 per cent respectively.

Economists generally are convinced the RBA will lift the cash rate at Tuesday’s monthly board meeting, which would be the first increase in more than a decade.

Financial markets are priced for the risk of a 0.15 per cent rise in the cash rate to 0.25 per cent, which is expected to be followed by increases of 0.25 per cent in subsequent months.

But not all economists are on board with a move at this meeting, particularly in the middle of a federal election campaign.

“The RBA is independent and will no doubt act as it sees fit to achieve its mandate,” HSBC chief economist Paul Bloxham said.

“But raising the cash rate 18 days before an election – the first hike in over a decade – would put the RBA right in the political mix.”

He believes it would be better to move in June by 0.4 per cent to 0.5 per cent and by which time the central bank will have seen the latest wage growth figures on May 18.

The last time the cash rate was increased during an election campaign was in 2007, a poll former Liberal prime minister John Howard went on to lose after campaigning on lower interest rates under his government.

The Morrison government is putting on a brave face after campaign advertising boasted interest rates have been lower under the Liberals than Labor over the past 30 years.

“Australia’s official cash rate has been sitting at 0.1 per cent for 18 months, that the lowest ever level we have seen in Australia,” Finance Minister Simon Birmingham told Sky News.

“There was always going to be some normalisation, particularly at a time where we are now facing huge international and global uncertainty.”

Prime Minister Scott Morrison went further addressing reporters on the campaign trail on Monday, saying it wasn’t about politics, it’s about what people pay on their mortgages.

“That is what I am concerned about. I mean, sometimes you guys always see things through a totally political lens. I don’t. And Australians don’t.”

Labor’s finance spokeswoman Katy Gallagher agreed a rate increase will be the decision of the independent RBA.

“But, the responsibility the prime minister has is for the cost of living crisis that is hitting the country,” she told ABC television.

“You’re hard-pressed to get between him and a camera and a microphone when things are going well, when things are tough, it’s always someone else’s fault.”

– AAP