The prime minister insists his government is doing its bit to bring down inflation that the Reserve Bank head believes is becoming increasingly homegrown.
Anthony Albanese says inflation is still "also a global phenomenon" and all world leaders are facing the same problem.
His comments follow a speech from RBA governor Michele Bullock highlighting the "increasingly homegrown and demand driven" nature of Australia's inflation challenge, evident in robust price growth for services such as hairdressers, dentists and dining out.
Price drivers are relevant because higher interest rates are not particularly effective against supply chain shocks - such as the conflict in Ukraine that sent energy prices surging - but are more useful for bringing domestic demand into better balance with supply.
"A more substantial monetary policy tightening is the right response to inflation that results from aggregate demand exceeding the economy's potential to meet that demand," Ms Bullock told an Australian Business Economists event.
Asked if the government should take responsibility for the increasingly homegrown nature of inflation, the prime minister stepped through its response to the cost of living crisis.
"One of the things that my government has done, is identify what are the areas where we can put provide cost of living relief, whether it be the energy price relief plan, cheaper child care, fee-free TAFE, the decrease in the costs of medicines," he told reporters on Thursday.
Mr Albanese said these policies were designed to relieve families without putting pressure on inflation.
Shadow treasurer Angus Taylor said the views of the RBA and the government were at odds, suggesting Labor was "out of touch" with cost of living pressures.
"Labor's economic plan isn't working with Australians suffering the worst fall in real disposable income in the OECD, collapsing productivity and an economy that is going backwards on a per person basis," Mr Taylor said.
He said the government's workplace reforms and energy market intervention were among policies "making the pain of inflation worse".
Surveying of manufacturers and service providers also pointed to weaker business activity in a welcome sign for the RBA.
The Judo Bank flash purchasing managers index recorded the second consecutive month of falling business activity, and the decline was the sharpest since August 2021.
Judo Bank chief economic advisor Warren Hogan said the findings "all but confirmed" a soft landing for the economy in line with the Reserve Bank's narrow path.
"Manufacturing remains soft, as it has been for most of 2023, although the sector does not appear to be slipping into recession at this stage."
He said the slowdown in business activity should bolster the case for patience on interest rates and give the RBA board space to stay on hold when it meets in December.
