For many voters the cost of living will be front of mind when they arrive at the ballot box.
Russia’s invasion of Ukraine in February 2022 was the beginning of a brutal war for those finding themselves in the middle of it.
But for the rest of the globe, it sent out economic shockwaves just as the world was attempting to resume “business as usual” after two gruelling years of the COVID pandemic.
The war placed a further squeeze on critical commodities — food and energy — and led into an across-the-board lift in prices.
Inflation in Australia started to rise sharply in early 2022. From 3.5 per cent in December 2021 it climbed to 6 per cent by the June quarter of 2022.
Former Reserve Bank assistant governor, and now Westpac chief economist Luci Ellis, says the inflationary surge which led to the cost-of-living shock felt by Australians over the last three years “was all about the pandemic”.
Luci Ellis says the cost-of-living crisis was sparked by COVID-19. ( ABC News: John Gunn )
“It was the combination of disrupted supply chains right around the world. Increased demand for the things that were being made in those supply chains,” she said.
“Everyone needed a new computer and a new desk.
“Demand was shifting towards the things that were disrupted right at the same time as supply was being disrupted. And then on top of that you … had a lot of government stimulus to support demand during the pandemic”
But it was Russia’s move that sent inflation climbing sharply.
And in Australia it had surged in the months leading up to the 2022 federal election campaign.
The Reserve Bank started lifting interest rates during the 2022 election campaign. (ABC News: Daniel Irvine)
In the middle of the campaign, the Reserve Bank lifted the official interest rate to 0.35— it had been at a historic low of just 0.1 per cent since November 2020 — it was the first of 10 subsequent rate hikes from the central bank.
“These decisions reflect the fact it is now time to begin withdrawing some of the extraordinary monetary policy support that was put in place to help the Australian economy during the pandemic” the then RBA governor Philip Lowe said.
“On top of this, Russia’s invasion of Ukraine has resulted in sharp increases in the prices of oil and gas, base metals and many agricultural commodities.”
Voters ‘didn’t blame the government’ at first
Scott Morrison’s government found itself having to defend rising inflation. (AAP Image: Mick Tsikas)
Economic management had always been one of the Coalition’s sales pitches to voters.
Now it was having to defend rising inflation and falling real wages
“There are places and ways that government can make a difference here, including growing the economy without adding to these inflationary pressures, providing longer term cost-of-living relief, getting real wages moving again,” Jim Chalmers said at the time.
“Australia was a bit later to the inflation surge [than the rest of the world],” Ms Ellis said. “So of course, we were a bit later to raise rates.
“The Reserve Bank took a deliberate strategy to go not quite as high for a bit longer than some peer economies, and there was internal research done, which has been released under FOI, to say that one of the rationales for doing it that way was actually, if you had a much more aggressive path of interest rates, yes, you’d get inflation down a little bit sooner, but the unemployment price you’d pay for that really just wasn’t worth it.”
Tony Mitchelmore says voters weren’t “really blaming the government” for inflation in 2022. (The Killing Season)
Managing director of polling firm Visibility, Tony Mitchelmore says voters at the time generally “didn’t blame the government, and the government really didn’t own the issue because of COVID, because of world forces”.
According to Ipsos in 2019 cost of living had been rated as an issue of concern by 32 per cent of voters.
In 2022 that figure had risen to 52 per cent — the highest rating for the cost of living since Ipsos began monitoring issues of concern in 2010.
