Inflation shock, rate rise risk jolt Australia PM's election campaignFILE PHOTO: Australian Prime Minister Scott Morrison speaks to the media at Melbourne Commonwealth Parliament Office, in Melbourne, Australia February 11, 2022. Darrian Traynor/Pool via REUTERS/File Photo

SYDNEY— Australian Prime Minister Scott Morrison on Thursday (Apr 28) blamed the war in Ukraine and COVID-19 related supply chain disruptions for a record rise in living costs which could jeopardise his chances of winning a national election to be held within weeks.

Australian consumer prices surged at the fastest annual pace in two decades last quarter, data out on Wednesday showed, as petrol, home-building and food costs rose, fueling speculation interest rates could rise from record lows as soon as next week.

“We are still feeling the effects of the rather extraordinary economic times that we are living in,” Morrison said during a media briefing, adding the COVID-19 lockdown in China had strained supply chains along with the Ukraine conflict.

Any rise in rates at the Reserve Bank of Australia’s next policy meeting on May 3 will result in millions of homeowners paying more money on their mortgage for the first time in a decade, just as the campaign for the May 21 election heats up.

Two of Australia’s big four banks expect the benchmark cash rate will rise next week and a third sees increased chances of a hike.

The last time the central bank raised rates in the middle of an election campaign was in 2007, and then Prime Minister John Howard went on to lose both the vote and his seat. Morrison said he does not see suffering a similar fate.

“We are in the middle of a global pandemic with a war in Europe, those situations were not in place in 2007 … Australians understand that,” he said.

Morrison’s Liberal-National Party coalition, with a one-seat majority in the lower house of parliament, is trailing the centre-left Labor, polls showed, in a campaign fought over climate change, national security and cost-of-living pressures.

Morrison has been touting his conservative government’s handling of the economy during the COVID-19 pandemic and a faster rebound. However, with inflation rising twice as fast as wages, real incomes are in the red.