Treasurer Jim Chalmers conceded flooding in NSW will place upward inflationary pressure in an economy touted to see annual inflation hit 7 per cent by the end of year.

Cost of living has been thrusted back into the spotlight after the Reserve Bank invoked a 50 basis point jump in the official cash rate to 1.35 per cent and confirmed more hikes would come to curb surging inflation set to occur over the coming months.

Dr Chalmers warned Tuesday's decision would force households to cough up more money to service mortgages and other debts, on top of significant price being felt for essential goods.

"We understand that this is really challenging news for Australians who are already doing a tough," he said.

"Mortgage repayments will now eat up an even bigger part of household budgets which are already stretched because of the skyrocketing costs of essentials."

Figures from RateCity have shown the July rate rise will add around $200 to a mortgage holder with an outstanding loan of $750,000.

It is the third consecutive month where the RBA has raised interest rates which were brought to historic lows of 0.1 per cent during the pandemic.

Dr Chalmers flagged current flooding across the Sydney basin is expected to place added strain to food shortages facing the country and drive up costs particularly for fresh fruit and vegetables.

The NSW Farming Association has estimated close to $1 billion in fresh produce and agriculture has been destroyed from the flooding which began over the weekend.

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"Our expectation is that these floods will make the cost of some essentials, some fruit vegetables, even more expensive at a time when the price for those essentials are already skyrocketing," Dr Chalmers said.

He also warned the damage and clean would have consequences for the federal budget which Labor have promised to deliver in October.

"The economic and budget costs will be really substantial," Dr Chalmers said.

"There will clearly be an impact on inflation, particularly given the nature of a lot of these local economies and there will be an impact on the budget ... in at least two ways.

"The support that we will provide to these communities will be costly, and because the impact on the economy will be costly that will flow through the budget as well."

RBA Governor Philip Lowe in his monthly statement on monetary policy said the bank would continue normalise the pandemic measures put in place since 2020, but claimed future hikes would be based on current pressures facing the economic environment.

"The Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead," he said.

"The size and timing of future interest rate increases will be guided by the incoming data and the Board's assessment of the outlook for inflation and the labour market."

June's consumer price index figures are set to be released at the end of month and is expected to show a further rise in headline inflation, which currently sits at 5.1 per cent.

Dr Lowe in his statement outlined unemployment and underemployment are poised to further fall over the coming months, however noted household spending and ongoing global shocks were persisting uncertainties facing the economy.

Supply constraints and higher commodity prices sparked by the Ukrainian conflict have fuelled surging inflation globally, particularly for the price of oil and gas.

"The Board will also be paying close attention to the global outlook, which remains clouded by the war in Ukraine and its effect on the prices for energy and agricultural commodities," Dr Lowe said.

Opposition spokesman for Treasury Angus Taylor claimed Labor needed to enact a "belt tightening" economic plan to deal with inflation and debt levels, but fell short of labelling it austerity measures.

"What we need now is the new government to build on that and to deliver that belt tightening, that situation where the government isn't in competition with householders in borrowing money," he said.