Why rate cuts are at risk from Labor’s $3.5b cost of living relief

With the federal election looming next year, the Labor government is poised to extend its $3.5 billion energy bill relief package in a bid to secure votes, but investors and strategists warn it risks further delaying much-anticipated interest rate cuts.

The Reserve Bank’s decision earlier this month to hold the cash rate at 4.35 per cent, a level it has held for the past year, has left financial markets bracing for the possibility that rate cuts will not come until May next year. This would be after the next federal election, which must be held on or before May 17.