The emergence of fresh inflation risks bubbling under the surface was enough to lock in the June interest rate hike in what was a "finely balanced" decision.
The minutes from the Reserve Bank's last meeting, which resulted in another 25 basis point increase to bring the cash rate to 4.1 per cent, revealed a close call between another hike or staying on hold.
Keeping the cash rate unchanged was a live option but a pause in June would have been "reconsidered at subsequent meetings, with the benefit of additional data".
As indicated by RBA governor Philip Lowe in a speech following the June decision, the board has become worried about inflation expectations that would keep it higher for longer.
The RBA has been willing to tolerate a longer time frame to bring inflation back to target - around mid-2025 - than some of its international peers in the hopes of keeping more people in jobs in the process.
"While this remained the board's objective, members noted that a more prolonged period of above-target inflation would increase the risk that firms' and households' expectations for inflation rise," the minutes stated.
"If this occurred, high inflation would become more persistent with the result that interest rates would need to be higher for longer."
Unit labour costs, an indicator of the average cost of labour per unit of output produced, have also been weighing on the RBA.
The minutes rehashed the central bank's concerns about sluggish productivity growth that could lead to high unit labour costs.
Board members were also mindful of the risk of widespread pay rises in line with inflation.
"Similarly, members observed that some firms were indexing their prices, either implicitly or directly, to past inflation."
The rebounding housing market was also cause for concern as it would likely reduce drag on consumer spending.
Supporting the case for a pause was falling commodity prices and sinking international shipping costs.
There had been little change in medium-term inflation expectations in financial markets, which could help keep inflation expectations contained.
Plus, the board noted that the RBA had a history of overestimating wage growth before the pandemic and that productivity could pick up by more than expected.
"In taking the decision to increase interest rates again, members acknowledged the considerable uncertainty regarding the outlook for household spending and the financial stresses facing some households," the minutes concluded.
"Given this, they agreed to continue to monitor trends in household spending closely and consider the implications for the inflation outlook, as well as developments in the global economy and the domestic labour market."
Rising interest rates have been weighing on consumer confidence, with the weekly index tracked by ANZ and Roy Morgan every week edging 0.3 points lower to 72.4.
ANZ senior economist Adelaide Timbrell said this was among the four weakest results since the COVID pandemic began.
"Notably, confidence about 'current financial conditions' fell to a new low, after declining 10.6 points in the past four weeks," she said.
© AAP 2023