The Reserve Bank of Australia has lifted the nation's official cash rate target by another 50 basis points, taking the baseline interest rate to 1.35 per cent.
It is the third consecutive month in which the central bank has hiked rates, which are now at a level not seen since May 2019.
For the average owner-occupier with a $500,000 debt and 30 years remaining on their loan, monthly mortgage repayments rise by $144 as a result of today's decision.
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When coupled with May's 50 basis point hike, that same borrower has weathered a $207 increase over the past two months.
Following the decision Treasurer Jim Chalmers said the rate rise was coming at a time when Australians were already dealing with "stretched budgets".
"While the trajectory of rising interest rates was set before the election, this rate rise is another blow to workers and families already under significant cost of living pressure," he said.
"Today's 50 basis point rate rise comes at a time when a significant number of Australians are confronted by yet another large-scale natural disaster, which will only add to these ongoing challenges.
"The government changed hands at a time of high and rising inflation, sky rocketing interest rates and falling real wages, and we have inherited a trillion dollars in debt which is now more expensive to service."
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RBA Governor Philip Lowe said the bank was taking the hard but necessary steps to control soaring inflation in Australia.
"Today's increase in interest rates is a further step in the withdrawal of the extraordinary monetary support that was put in place to help insure the Australian economy against the worst possible effects of the pandemic," he said.
"The resilience of the economy and the higher inflation mean that this extraordinary support is no longer needed. The Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead.
"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."
Chief economist at CreditorWatch Anneke Thompson said the RBA was no longer waiting to step in to the lending market.
"The Reserve Bank of Australia (RBA) has once again increased the cash rate in an effort to reign in inflation before a 'spiral' sets in," she said.
"Today's announcement is unsurprising, given recent comments by both Governor Philip Lowe and Treasurer Jim Chalmers that inflation is likely to be around seven per cent year's end.
"Under this scenario, it is highly likely that further increases in the cash rate will be announced as the RBA is probably beyond taking a 'wait and see' approach to the impact of their cash rate rises and will need to continue raising rates until they get comfortable that inflation is starting to move down."
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Thompson said the housing market has already been hit by interest rate hikes, with Sydney and Melbourne prices dropping by up to 2.8 per cent over the past three months.
"The RBA will monitor house price movements closely, as Australian homeowners are heavily impacted by the 'wealth effect'. Coupled with a falling share market, for those with investment portfolios, this has a surprisingly large negative impact on consumer sentiment," she said.
"Nobody likes falling asset values, but, perversely, it presents an opportunity for the Australian economy.
"The hope being that the combined impact of the wealth effect and reduced disposable income will bring inflation down faster than in countries where household debt isn't as high."
