Rising prices eat into savings and erode purchasing power, Governor Michele Bullock has warned, and should inflation stay higher for longer more borrowers will end up in mortgage stress and some even forced to sell up.
"A really important point to note here, is that lower income borrowers are over-represented in the group of people who are really struggling," she told the the Anika Foundation on Thursday.
Her remarks followed a tepid 0.2 per cent expansion in the economy in the June quarter and one per cent through-the-year increase.
Cash-strapped households have been cutting back on non-essential items. (Mal Fairclough/AAP PHOTOS)
The RBA was expecting a subdued reading, with a slower economy an expected consequence of higher interest rates, jacked up and kept elevated to weaken demand and bring down inflation.
Yet a weaker economy means a deteriorating labour market and higher unemployment, which the central bank has been trying to mitigate by tolerating a longer path to within-target inflation than many of its peers.
In her speech, Ms Bullock said the board was looking to strike "an appropriate balance" between the RBA's inflation and full employment objectives.
"Given the starting point of high inflation and a relatively tight labour market, and that low and stable inflation ultimately supports our full employment objective, our highest priority has been and remains to bring inflation down," she said.
Posturing on future interest rate moves was little changed from communication since the August board meeting.
The board was still of the view it was "premature to be thinking about interest rate cuts", provided the economy evolves as it expects.
Much of the speech was dedicated to the importance of bringing inflation down.
Those under 40 were experiencing high inflation for the first time and many Australians had "forgotten how bad it is".
"There is a reason why there is so much talk about the cost of living – high inflation hurts everyone, and especially the most vulnerable."
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