Here’s how the interest rate hike affects mortgage payments and your budget

Australians are suffering increased cost of living pressures following another interest rate hike, but the new Labor government’s October Budget promises relief.

Following a monthly meeting on Tuesday, the Reserve Bank of Australia raised the cash rate from 0.35 percent to 0.85 percent.

It was the largest rate hike since February 2000, and the second since inflation peaked at 5.1 percent in the March quarter, with economists forecasting that this figure would be pushed upwards again in the June quarter as power, food, and fuel prices continue to climb.

Westpac was the first of the Big Four banks to fully pass on the rate hike, announcing a 0.50 percent annual increase in home loan variable interest rates for new and current clients beginning June 21.

After the RBA announcement, Treasurer Jim Chalmers said Aussies with an average mortgage with $330,000 remaining will need to pay an extra $87 more a month.

Holders of an average new mortgage of about $595,000 will need to pay about $157 more a month.

‘This will be very difficult news for all of those Australians who are already facing skyrocketing costs of living in this country,’ Dr Chalmers said.

The Treasurer said the government was aware that Aussies are struggling and would deliver cost of living relief in the October Budget.

‘I will hand down a budget in October and a key part of that will be a cost of living package around childcare and medicines, trying to get power bills down, over time, trying to get real wages growing again,’ he said.

But the biggest issue facing the government is the soaring price of power.

The issue is so pressing that Labor’s Resources Minister Madeleine King said the nation urgently needs to get more coal power plants back online ‘because that is the missing piece in the puzzle right now’.

‘There’s been unplanned outages for many reasons; many beyond the control of those operators and I do accept that, but I hope they are doing their level best to make sure this power source comes online as well,’ Ms King told ABC Radio.

Her call for more coal comes after Labor spent six weeks talking up its climate change ambitions throughout the election campaign.