On November 28, Victoria may provide a preview of the first electoral verdict on the ‘inflation dragon’.

The Reserve Bank lifted the cash rate again on last week, the fifth increase this year and the highest in an exceptionally long time.

This is the first general election in the country to be fought with all five rate rises mixed in with all the other campaign narratives and issues being managed by the major parties.

On a $600,000 variable loan, the rise adds approximately $92 a month to a household’s bill. When we stack the four before it, that household is paying roughly $450 a month more than it was in January, close to $5500 a year.

The households that will feel this latest rate hike the most are not evenly spread across the state. They are concentrated in Melbourne’s growth corridors – in local government areas like Wyndham, Melton, Hume, Whittlesea, Casey and even Cardinia.

These are the municipalities with the highest share of mortgaged households in Victoria, and some of the highest in the country. The sort of suburbs that have delivered the Victorian Labor government its victories since 2014.

The best analogy that can be used? They are the foundation of Labor’s electoral success, the concrete slab holding all campaign strategies Labor has implemented for decades.

The timing could hardly be worse – the new loan repayment will land through the second half of November, right as early voting opens.

A large share of Victorians will cast their ballot in the same fortnight their mortgage goes up.

Nothing in last week’s RBA decision was decided by the Victorian Labor government, or any other state government.

The RBA’s statement pointed to the Middle East conflict and the fuel prices that have flowed from it, triggering inflation across all goods and services.

A state government has no lever here – it does not set the cash rate, it does not control the price of oil and it does not run fiscal policy at the scale that moves national inflation.

If blame belongs anywhere in Australian politics it belongs to a group of politicians who refuse to acknowledge that most of this problem, unfairly faced by many Australians, has been imported due to a war no one asked for.

Hence, Victorian Premier Ben Carroll can say all of that and every word will be true. But it will make no difference as voters in the outer suburbs talk about “the government” as a single thing.

The Premier, the Prime Minister and the Reserve Bank governor sit in the same room, with a door sign marked “people in charge”. When life gets harder, those in that room get the blame.

An opportunity and a problem

The Victorian Labor campaign is confronted by an opportunity, and a problem.

Labor has chosen to run on cost of living – that includes 20 free dental clinics and a partial unwinding of its own land tax changes. These are real measures and some are well targeted, but the electorate now weighs every offer against its mortgage statement.

Twenty dental clinics are worth something, but a hypothetical visit to the dentist cannot compete with the extra $450 a month.

However, we can chalk this trade-off as a net positive as it provides the incumbent government a tangible policy, relieving fiscal pressure at the kitchen table.

The real challenge is the rise reopens the question Labor least wants asked: “Why does everything cost more in Victoria?”

Recently, the Victorian Labor government cut the land tax threshold from $300,000 to $50,000, attempting to lessen the burden of owning property.

Households in the growth corridors have absorbed higher state charges and higher federal rates in the same period.

The Victorian Labor government’s own media release, when advertising this policy pivot, highlighted that most who were historically slugged this tax lived within these growth corridors.

But a pre-election pivot may not be enough. Voters throw it all into one bucket of misery, now forcing many of them to cut deeply into important services, from a mental health appointment no longer covered by government to cutting back on weekend activities for the family.

Then there is debt, an issue that has lacked political traction for years until that debt has slowly seeped into the minds of every Victorian, connected to every pothole and every extra hour spent in an emergency department.

Victoria carries the largest debt of any state, with net debt heading towards $175 billion, and the cost of servicing it climbs with every rate increase.

The opposition has spent a year arguing the state cannot afford Labor. It points to the potholes and the straining emergency departments – all due to debt.

The RBA has just made that argument louder without Opposition Leader Jess Wilson having to say a word.

Victorian Labor is not at fault for the rate rise, but debt has become salient as it strangles family budgets, forcing many to cut back and make, for many, heartbreaking decisions. It is these personal, intimate decisions that make it easier for voters to suddenly understand why state debt also results in cuts to even critical services that matter.

What the rest of the country will learn

Elections are not courts – governments are judged on conditions, not culpability. Victorian Labor won in 2018 and 2022 with cheap money at its back, filling its sails and policy options. It took the credit without hesitation. The same arithmetic now runs the other way.

The latest polling has Labor in the mid-20s on percentage of primary vote, the Coalition at around 30 and One Nation in the low 20s.

Three things in the result will matter well beyond Victoria. First, the size of the swing in the mortgage belt relative to the inner and middle suburbs, which will show how much of the anti-incumbent mood is rates and how much is everything else.

Second, where the departing Labor vote lands – with the Coalition in the middle suburbs, or with One Nation in the outer corridors and the regions.

Third, whether a government with no hand in the decision gets punished for it anyway. The latter will be watched closely by every other incumbent government facing voters in the coming year and, if we are to believe the RBA’s forecast, years.

Naturally, federal Labor should watch most closely. The state seats that decide Victoria sit inside Calwell, Lalor, Gorton, Hawke, Holt and Bruce.

They are the same outer-suburban seats that hold up the Albanese government’s majority, but according to our Resilience Index, house some of the lowest financially resilient households in the country.

NSW Premier Chris Minns goes to the polls in March with the same cycle behind him and the similar geography across western Sydney.

The last rate decision of the year falls on December 8, 10 days after polling day.

The big banks do not expect a cut before the second half of 2027 and based on the RBA’s statement this week, beyond that. Hence, there is no relief coming before Victorians vote.

Nobody in Cranbourne cares whose fault it is, they care that the number went up again, that it happened on this government’s watch and that the people asking for a fourth term sit in a room with a door sign marked “people in charge”.

On November 28 we find out what that does to a government. Every other incumbent in the country will be watching closely.

Kos Samaras is a director at political consultancy firm RedBridge Group and a former Labor Party strategist

This article previously appeared in Pearls and Irritations. Read the original here