Mortgage holders are starting to crumble under the weight of 11 interest rate rises, with two in five households struggling to meet repayments.
The latest pulse check on mortgage holders from comparison site Finder, which found 40 per cent were finding it hard to stump up their repayments, comes ahead of another interest rate call on Tuesday.
The number of households experiencing mortgage stress shot up from 24 per cent this time last year and represented the highest proportion of households since the comparison started tracking the question in 2019.
Australia's central bank could have another rise or two in store following hotter-than-expected inflation data last week.
The official inflation index came in at a 6.8 per cent in the 12 months to April, up from 6.3 per cent previously.
A separate gauge from the Melbourne Institute based on the ABS methodology suggests inflationary pressures are still strong, with inflation increasing 0.9 per cent in the month of May - up from 0.2 per cent growth in April - but annual growth coming in slightly softer at 5.9 per cent in May, down from 6.1 per cent in April.
While Treasurer Jim Chalmers said statistical variability, namely the changes to the petrol excise that took effect in April last year, were behind the jump in the ABS monthly inflation index, the results have some economists worried.
The Australian National University's Reserve Bank shadow board, made up of nine macroeconomists, said it was unwelcome news for inflation to be drifting further away from the RBA's target range of two-three per cent.
The shadow board members are leaning toward another 25 basis point hike on Tuesday to bring inflation down.
They attached a 63 per cent probability the cash rate should be higher than its existing 3.85 per cent and a 36 per cent probability the RBA should hold.
The shadow board pointed to weakening consumer sentiment as well as relative resilience in the business sector.
"Considering the consumer and business indicators together, it looks as though the Australian economy may be softening but only slightly, despite the recent extended string of interest rate hikes," they wrote.
But other economists, including those at Westpac, expect the cash rate to stay at 3.85 per cent.
Chief economist Bill Evans said there was uncertainty hanging over household spending, with many mortgage holders about to roll off low fixed rate loans and a sharp uptick in rents now weighing on spending.
The ABS also released business indicators data on Monday showing business profits lifting 0.5 per cent over the March quarter.
Wages and salaries rose 1.8 per cent over the same period, and inventories grew 1.2 per cent.
Job ads as measured by ANZ and Indeed also bucked the downwards trend and lifted 0.1 per cent in the month of May, up from a downwardly revised 0.7 per cent monthly fall in April.
