At every federal election in the recent past, interest rates and the effect on voters servicing a residential mortgage has been a key issue. This is no surprise, for those servicing a mortgage the movement of the RBA cash rate which in turn affects home loan interest rates has a big effect on a borrower’s cost of living.
With the RBA cash rate at historically low figures this issue should be running in favour of the incumbent Labor Government. Is the Coalition vulnerable to a Labor campaign on interest rates?
It is conventional wisdom that elections are decided in outer metropolitan electorates chock full of young families with home loans. However a cursory look at the 2011 Census figures shows that not all marginal seats are seats with high concentrations of home loan borrowers. Also not all seats with high concentrations of home loan borrowers are marginal seats.
In this post we will look at the 2011 Census data on owner-occupied dwellings owned with a mortgage as a share of total dwellings to see how to concentrations of home loan borrowers are spread across Australia’s 150 electorates.
Below we have separated all 150 seats by seat status/safety (Safe Labor, Marginal Labor, Marginal Coalition & Safe Coalition) and the share of all dwellings which are owned with a mortgage. For the latter metric we have broken down the seats into three brackets, the 50 highest seats, the 50 middle seats and the 50 lowest seats marked in red, yellow and green respectively. The table is below, it is a large one so click to enlarge.
In the above table have marked in bold are the 10 highest shares of dwellings owed with a mortgage. Only two of these seats are marginal.
The defining feature of the above table is that generally higher shares of mortgaged owner-occupied residential properties are found more often in Labor seats while the lower shares of the same are found more often in Coalition held seats. This is due to geography, in the capital cities, due to their large size federal electorates can entirely contain the new suburbs on the urban fringe which have a high proportion of new residential developments, many of which are purchased by the owner with a home loan.
In regional Australia, new residential developments in the smaller provincial cities are balanced out by existing housing stock. As the Coalition holds a majority of rural and regional seats, they hold more of the seats which exhibit a lower share of dwellings owned with a mortgage. While Labor with a greater strength in the capital cities hold more seats with a higher share of owner-occupied dwellings owned with a mortgage. Keep in mind, this is a tendency not a hard and fast rule. Seats with a high share of dwellings owned with mortgages fall all over the political spectrum from the uber-safe Labor seat of Gorton to the uber-safe Liberal seat of Bradfield.
It is also important to note that the issue of interest rates can shift swinging voters, but not all voters are swinging voters, ultimately interest rates as a single issue can only effect elections in the marginal seats. Below is table of the marginal seat pendulum with the shares of dwellings owned with mortgages included. For this metric we have retained the 3 cohort color coding for ease of comparison.
As you can see it is the Coalition marginal seats which are more affected by high shares of dwellings owned with mortgages. Of the Mortgage Belt Marginals (seats in the above table shaded red) the Coalition hold 10 compared to Labor’s 4. With this demographic disadvantage combined with being in Opposition in the current low interest rate environment, the Coalition are vulnerable to the current low interest rates as an election issue. Furthermore of the 16 Coalition held seats on TPP margins of 3% or less, 10 are Mortgage Belt Marginals.
That being said, this weakness is ameliorated somewhat by the fact that of 10 Coalition held Mortgage Belt Marginals, 5 are held by MP’s who have won the seat for the first time at the last election and if they re-contest will be sophomores.
Nevertheless, with home loan interest rates at relatively low levels by historical standards this is an issue in Labor’s favour and the Mortgage Belt Marginals are a weak spot in the Coalition’s electoral defences given a 50-50 election.
Special Postscript (12/12)
In comments Fmark has asked for scatter plot of (presumably) electorate shares of dwellings owned with mortgages and the TPP. We have used the Coalition TPP as a reference. The scatter plot is below.
In the scatter plot we have marked the Labor seat data points in red and the Coalition seat data points in blue. The chart shows that the Labor seats do occupy more data points towards the top of the chart. Of all seats above a 35% share of dwellings owned with a mortgage, 20 are Labor, 14 are Coalition. Furthermore averages of the two groups also show Labor seats with more residential mortgage holders, the Labor seats average is 30.8%, the Coalition seats average is 29.4%. However there is little to no correlation between electorate shares of dwellings owned with mortgages and the TPP vote. The reason we have not plotted a trend line, is that the R squared is only 0.03, not enough to justify plotting a trend line let alone prove any relationship.