Interest rates dominate closing weeks of election campaign
Last Tuesday, Australia turned its eyes away from the political race, and stopped for a horse race. The Melbourne Cup - always on the first Tuesday in November - is the most famous race of the year. So the other great race - the six week campaign for the Prime Minister's job - had to make space in the headlines for the horses.

But it was another event, the following day that really hit the politician's race - the Reserve Bank did what all the economists predicted - it raised interest rates by a quarter of one percent, and indicated that more rises will happen in future months. The Bank says Australia's inflation rate is heading above three percent and the Bank's job is to keep inflation below that - in the two to three percent range.

One of the things the Howard Government boasts about is that almost its first action on taking office in 1996 was to give the central bank its independence. The bank acts without direction from the government on setting official interest rates.

The headache for the Prime Minister is that in the last election race, three years ago, he promised to keep interest rates at record lows. The key line from that last campaign - back now to haunt Mr Howard - was, "Who do you trust to keep interest rates low?"

The problem with putting the question in that way is that the Prime Minister doesn't set rates - he'd given away that power to achieve better economic management. Even so, the implied pledge helped Mr Howard win last time - and it may sink him this time.

As the Labor Opposition repeatedly and rather gleefully points out, there have since been six rises in rates since the last election. And Australia, which still thinks of itself as a nation of home owners, is very sensitive to what that means for home mortgage rates.

So when Mr Howard fronted the microphones after the Reserve Bank announcement, he had a difficult line to walk. And he made it more difficult by trying to say sorry. As the song goes,
sorry can be the hardest word to say...and the effort by the Prime Minister shows the problem.

The Prime Minister says he is sorry at the pain the interest rate rise might cause to Australian home buyers. He then turns to the argument that in difficult economic times it'd be better to stick with his proven economic team, not the untried lot on the Opposition benches.

The headlines the next day were all about being sorry - "Howard apologises for mortgage pain"
and...Pained PM seeks rates forgiveness...the tabloid version in Melbourne was simply "PM Sorry"... while the sharper version in the Sydney tabloid was "PM finally says he's sorry after six interest rate rises but.....NOT AS SORRY AS WE ARE".

Then things got messy. Because at his next news conference, Mr Howard was asked - If you're not responsible for interest rates - that's the Reserve Bank's job - why did you apologise. The answer from the PM was to play semantics: "I said I was sorry they'd occurred. I don't think I actually used the word "apology". Oh dear, Mr Howard says "sorry" but he's not apologising. It was one of those unscripted moments political parties dread. Election campaigns can swing on the smallest of moments, just a word or two. And perhaps the sorry-apology moment was one of those turning points in this Australian race.

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