The 10th consecutive interest rate rise in a row will further tighten the screws on household budgets, according to the treasurer.
Ahead of a closely watched speech by Reserve Bank governor Philip Lowe on possible further hikes, Dr Jim Chalmers said the increase had put further pressure on families.
The Reserve Bank on Tuesday raised the official cash rate by 25 basis points to 3.6 per cent, the highest level since 2012.
"Yesterday's decision will really tighten the screws on household budgets, I think that's very clear. A lot of people are doing it very tough and it will make life a bit harder," Dr Chalmers told ABC Radio on Wednesday.
"When people are under extreme financial pressure, that has implications for their wellbeing more broadly.
The RBA governor will deliver a speech to a business conference later on Wednesday on inflation and economic data, which is set to be closely scrutinised for further insights into interest rate plans.
While the treasurer said there were encouraging signs inflation had peaked, it remained to be seen whether it was the case.
"Inflation will moderate over the course of the next 12 to 18 months, we would like it to moderate quicker, as quickly as possible," he said.
"Obviously I'm concerned about the position that Australians find themselves, particularly Australians with a mortgage."
Deputy Liberal leader Sussan Ley urged the government to bring spending under control in order to lessen the impact of inflation.
"It's simple economics, if the government doesn't get fiscal policy right, that makes inflation go up, that makes inflation higher than they need to," she told ABC Radio on Wednesday.
"The Reserve Bank is doing its job, the government is not ... this means an extra $20,000 a year that a typical Australian family will now have to find on their mortgage, this is incredibly difficult for families right now."
The treasurer said there was a need to show restraint in the budget.
"We will do that in every budget. We will look for areas where we can trim spending," he said.
"Restraint's important, but in addition to the magnitude of the spending, which does matter in times like these, also the quality of the spending matters."
RateCity analysis shows the average owner-occupier with a $500,000 loan and 25 years remaining will see their monthly repayments rise by another $77 if banks pass the rate hike on in full.
The average borrower's monthly repayments are up nearly $1000 since April 2022, when the rate rises began.
RateCity research director Sally Tindall said mortgage rates starting with a "four" were likely to disappear after this rate rise.
"After this latest hike washes through, a small handful of lenders are likely to hold on to rates just under five per cent, but we're likely to be able to count these loans on two hands," she said.
Ms Tindall urged mortgage holders to refinance to secure a better deal.
© AAP 2023