Treasurer Jim Chalmers has warned inflation is about to get “significantly higher” – although he expects interest rate rises to put a lid on spending.

It came as more home lenders said they would lift mortgage rates by 0.50 per cent, following the Reserve Bank of Australia’s bigger than expected cash rate hike on Tuesday.

On Wednesday, Macquarie Bank, Bank of Queensland and ME Bank were among the lenders to confirm their mortgage rates would rise.

Westpac – the only one of the big four banks to so far confirm it will also move – acted within hours of the RBA decision on Tuesday.

“The majority of our customers are ahead on mortgage repayments and have a buffer available to help them manage an interest rate increase,” Westpac consumer and business banking head Chris de Bruin said in announcing the bank’s decision.

Some institutes are also lifting rates for savings accounts.

Also on Wednesday, Dr Chalmers told a conference hosted by Sky News and The Australian that he aims to hand down his first budget on October 25 after providing an economic update to the parliament when it returns in July.

He said he expected interest rate rises would dampen activity in the economy while affecting house prices and savings.

“They [interest rate rises] will also have a disproportionate impact on people on the lowest incomes, people who haven’t been able to build up those buffers in their own personal finances,” he said.

“All of this will flow through to the budget. They will put significant pressure on a budget that already has its share of difficulties, including a relatively significant structural deficit, and now with those higher borrowing costs.”

Dr Chalmers’ comments came after the RBA lifted rates for the second consecutive month. The bank board also flagged further increases would be needed to contain inflation.

Dr Chalmers warned there would be no “automatic upgrades” in the budget handed down later this year.

“Commodity prices are helping but some of the other upgrades are not necessarily eventuating,” he said.

“We have got a lot of pressures that weren’t in the budget that we inherited, like some of the ongoing costs with COVID-19.”

He also said he thought there was “a really big opportunity here to have a stronger economy and a stronger society after COVID-19 than we had before”.

“Australia can take its place at the absolute first rank of national economies in the world. But first we need to navigate together these choppy waters,” he said.

Business Council of Australia chief executive Jennifer Westacott said budget repair was important, as this had allowed the previous government to respond to the pandemic.

“But we have got to do that in a way that’s about growth,” she told the conference.

“I don’t think you cut your way out of this, you have got to grow your way out of this.”

-with AAP

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