Treasurer Jim Chalmers is telling homeowners to brace for a "difficult day" as the Reserve Bank prepares to hike interest rates for a second consecutive month.
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Economists predict the Reserve Bank board will raise the official cash rate by up to 40 basis points at Tuesday's meeting, as it attempts to slow inflation which is running at a 21-year high.
The decision would mark the second rate rise in as many months, after the central bank made a mid-election campaign call to lift the cash rate from a historic low of 0.10 to 0.35.
A further 0.25 basis point hike on Tuesday would see owners of a median-priced home in Canberra forced to pay an extra $118 per month on their mortgage, according modelling reported in The Canberra Times.
Ahead of an announcement of the board's decision at 2.30pm, Dr Chalmers told mortgage holders to prepare for a rate rise.
"We don't preempt decisions of the independent reserve bank, but it is universally expected today that it will be a difficult day for a lot of homeowners who are already facing rising costs of living elsewhere in the household budget," Dr Chalmers told ABC's News Breakfast.
"They'll have to find a little bit more for this to service their mortgage."
Dr Chalmers has listed rising interest rates as one part of the "cost-of-living crisis" which Labor had inherited from the former Morrison government, alongside rising inflation and falling real wages.
After being kept at a record low during the pandemic, market analysts are predicting interests rates will continue to rise over the coming months.
Dr Chalmers recommitted to using his October budget to start addressing the cost of living pressures on Australian households with measures to cut the cost of childcare and medicines.
"Our responsibility as the new government surveying this inheritance, this cost of living crisis that we have inherited from our predecessors, is to do what we responsibly can in the context of a budget which is heaving with a trillion dollars in Liberal Party debt," he said.
New shadow treasurer Angus Taylor acknowledged the looming rate rise was a "big deal for mortgage holders".
Mr Taylor said while the Reserve Bank made its decisions independent of government, the new Labor regime could avoid fueling inflation by managing spending "very, very carefully".
Dan Jervis-Bardy
Dan covers federal politics from Parliament House, with a special focus on climate policy and the NDIS. He has previously reported on ACT politics and urban affairs since joining the Canberra Times in 2018.
Dan covers federal politics from Parliament House, with a special focus on climate policy and the NDIS. He has previously reported on ACT politics and urban affairs since joining the Canberra Times in 2018.
