Will Dutton stand in the way of cost-of-living relief during the election campaign?

We might not know when the election campaign will start, but one thing is almost certain: Labor will promise more cost-of-living relief.

It sees this week’s interest rate cut as vindication of its economic strategy to date and has been emboldened by the comments of the Reserve Bank Governor.

Less certain is how the Coalition will respond to this further household support. Does it rail against more wasteful spending? Or reverse course and back the handouts?

Whether it comes before or after the starter’s gun is fired on the campaign, the promise of more support is set to crystallise the economic debate that’s raged since the last election. Has government spending at a time of high inflation been reckless or responsible?

Labor appears more than happy for that debate to dominate the campaign.

Coalition to face test on spending

Jim Chalmers insists he’s working towards a Budget being delivered on March 25, even if few believe Anthony Albanese will wait that long to call the election.

Whether it comes in the Budget or as a campaign promise, the Treasurer gave his strongest indication yesterday of what we can all expect. “If people are looking for hints about what the fourth budget will contain”, the Treasurer told Radio National, “the hints are in the first three”. He went on to remind listeners this included “substantial and meaningful and responsible cost-of-living help”.

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The opposition, having laid blame for inflation at the feet of government profligacy, has been promising “belt tightening” and spending cuts as the answer. It’s specifically called the government’s energy bill relief a “band-aid on a bullet wound”.

And yet, with an election looming, the Coalition is now keeping its options open. “We’ll wait and see what the government’s proposing,” Shadow Treasurer Angus Taylor said, on the widely anticipated prospect of Labor promising another $300 rebate for the coming financial year. This is where policy purity meets election reality for the Coalition.

Is Peter Dutton willing to stand in the way of households receiving an extra $300 during an election campaign? Can he convince voters this sort of government spending will only delay another rate cut?

After announcing the rate cut decision, the Reserve Bank Governor did little to encourage any such argument.

If anything, Michelle Bullock gave the green light for the government to go ahead with more relief.

“Cost-of-living relief, I should point out, is really helpful for households”, Bullock argued. “It does really help the financial pressure they’re under. So, it’s important.” The Governor offered no criticism of previous government support or warnings against more being delivered.

She even echoed the government’s argument about the importance of maintaining employment while bringing inflation down. This is the so-called “soft landing” that’s avoided long jobless queues. Bullock defended the way both monetary and fiscal policy have succeeded in delivering “a really positive outcome”.

If the rate cut was a pre-election gift, these comments were the cherry on top for a government that’s often struggled to convince unhappy voters of its economic strategy.

That doesn’t mean struggling households will necessarily be dancing in the streets in celebration, revising their judgements on how the economy has been managed. Labor still has much work to do in the campaign to convince voters better times are ahead and that it has a second term agenda worth supporting.

But the government can now point to interest rates starting to fall, real wages continuing to grow –yesterday’s figures showed a fifth consecutive quarter of wage growth – and continued strength in the jobs market.

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Opposition response unclear

Chalmers has been emboldened to stick with his strategy and offer more cost-of-living relief, whether in a pre-election budget or as a campaign promise.

The Coalition, meanwhile, is about to face a test. Will it hold the line on spending restraint in the heat of a campaign?

For now, the opposition is highlighting the slow recovery in living standards, and the fact another rate cut is no sure thing. Its alternative approach, however, remains unclear.

Dutton wants to leave some big decisions until after the election. The extent of spending cuts would be worked out in office, he says. The shape of immigration cuts would be done in consultation with the department.

But when the government rolls out its next round of cost-of-living relief in the coming weeks, households will want to know where the Coalition stands.

David Speers is national political lead and host of Insiders, which airs on ABC TV at 9am on Sunday or on iview.