Mortgage holders have been slugged with another cash rate rise and the spectre of further financial pain continues to haunt borrowers.
At the June interest rate meeting, the Reserve Bank opted to lift interest rates by another 25 basis points, taking the cash rate to 4.1 per cent.
The hike marks the 12th increase since May last year when the central bank first started jacking up interest rates.
The latest decision was considered a close call by most observers, with many expecting the RBA to hold fire to allow the tightening so far to wash through.
But as Governor Philip Lowe explained, inflation is still too high, at seven per cent in the March quarter.
"This further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable time frame," Dr Lowe said.
In a statement, the governor listed simmering inflation risks that motivated the increase - services price inflation that's "still very high" and proving persistent overseas and "briskly" rising unit labour costs.
In a parliamentary appearance last week, Dr Lowe explained high unit labour costs - the difference between wages growth and productivity growth - was a risk to the RBA's plan to stamp down inflation.
Some economists have warned the annual increase to award wages may add to these pressures but the governor said the industrial umpire's decision had not thrown off its outlook for wages - as long as productivity growth picked up.
Treasurer Jim Chalmers said the productivity challenge had been building for some time.
"And you can't click your fingers and make it turn around," he told reporters in Canberra.
Dr Chalmers said technology, energy and skills were the three main pieces of the government's productivity agenda and used an upcoming modernisation of Australia's payments system as an example of the work under way.
The treasurer also warned that workers' wages were not responsible for the interest rate rises.
"Low and middle-income earners are already bearing the brunt of these interest rate rises, they shouldn't be blamed for them as well," he said.
Shadow treasurer Angus Taylor said the government was leaving all the heavy lifting up to the central bank.
"The Reserve Bank has got the foot on the brake at exactly the time when the government has put the foot on the accelerator, with $185 billion of additional spending in the May budget," he said.
Last week, the RBA governor said the budget would have a broadly neutral influence on inflation.
The June interest rate hike will add an extra $1200 every month to repayments on the average loan, a Finder analysis shows, and the RBA may have more increases in store.
Dr Lowe kept his reference to the possibility of more tightening in his statement.
"Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable time frame, but that will depend upon how the economy and inflation evolve," he said.
KPMG chief economist Brendan Rynne said the RBA was clearly most worried about inflation expectations becoming entrenched so decided to "go hard and go early".
"(The RBA) fears that if it waited a couple of months to act - as recent economic data gave it reason to - it could miss the boat and then be forced to raise rates even higher," Dr Rynne said.
He said there was a strong case for the RBA to wait a month or two to see if inflationary pressures were coming off at a reasonable rate.
