Labor has seized on the Reserve Bank's decision to hike interest rates higher than many had predicted, labelling it a "tough day" for millions of Australians now facing an increase to their monthly mortgage payments.
But the Prime Minister argued home owners have been preparing for a potential interest rate rise, and said it was the result of a strong economy.
The official cash rate has risen for the first time in 11 years to 0.35 per cent, with further increases forecast for later this year.
Shadow Treasurer Jim Chalmers said Australians face a cost-of-living crisis if the banks pass on the full increase, saying households have already been hit with "skyrocketing inflation, rising interest rates, falling consumer confidence and falling real wages".
"Scott Morrison's economic credibility was already tattered, and now it's completely shredded," Mr Chalmers said.
If passed on in full by banks, the rate rise will add $65 a month to repayments on a $500,000 mortgage, and double that on a million-dollar loan.
"This interest-rate decision today will have a big impact on the household budgets of millions of Australians," Mr Chalmers said.
"This is a tough day for Australians."
But Scott Morrison said the Reserve Bank's decision to increase the cash rate was proof of a resilient economy, and that Australia was faring better than many other countries facing rapid inflation.
Mr Morrison argued households were ready for a rate hike, pointing to the number of Australians who had switched to fixed-mortgage rates.
"The situation Australia faces is a situation faced all around the world," Mr Morrison said.
"Australians understand that. How do I know that? Because as they face the future, they've moved from variable interest rates to fixed interest rates, 20 per cent to 40 per cent."
Treasurer Josh Frydenberg said the Coalition was sympathetic to the cost-of-living pressures Australians were facing, and had responded through the federal budget with increased tax offsets, a cut to the fuel excise and reduced costs of some medicines.
But he said the Reserve Bank's decision reflected low unemployment rates and signs of rising wages.
"It is actually a reflection of an economy coming back to life after the shock of the pandemic," Mr Frydenberg said.
Interest rates expected to rise regardless of who wins the election
Mr Morrison has sought to downplay his responsibility for rate hikes, despite claiming last month that his government's policies would put more downward pressure on the cash rate than Labor.
But Labor has been keen to paint the rate hike as part of a "triple whammy" of cost pressures being laid on Australians, alongside rising inflation and stagnant wages.
Opposition Leader Anthony Albanese conceded the interest rate would continue to rise regardless of who wins the election, but said the Coalition had failed to ease cost-of-living pressures and support wage growth.
The Coalition has been criticised by unions and the opposition for refusing to back a wage rise case currently being considered by the Fair Work Commission.
Mr Frydenberg said the government was driving wage growth by reducing the unemployment rate.
