The Reserve Bank board has an open mind on interest rates in April, says Philip Lowe

Dr Lowe told a business summit in Sydney the Reserve Bank had "done a lot in a short period of time and, at some point, it's going to be appropriate to sit still and assess the collective effects of that".

Before its next monetary policy meeting in early April, the RBA board will get important updates on the economy including inflation, jobs growth, retail spending and business conditions.

"If collectively they suggest that the right thing is to pause, then we'll do that," Dr Lowe said.

But the governor warned the central bank was also prepared to lift rates higher if needed to push inflation lower.

"If [the data] suggest we need to keep going then we will do that. We have a completely open mind about what happens with the next board meeting."

Markets have lowered their rate hike expectations after the RBA adopted a more cautious tone on the speed and extent of further monetary policy tightening.

Investors currently think an April rate hike is less than a 50-50 chance and no longer fully expect the official cash rate to reach 4.1 per cent.

Treasurer Jim Chalmers acknowledged Tuesday's rate rise would increase the financial pressure on many and said the government would provide cost-of-living relief "where we can".

"[Tuesday's] decision will really tighten the screws on household budgets, I think that's very clear. A lot of people are already doing it very tough and it will make life a bit harder," Dr Chalmers said.

The treasurer said the government was trying to make life "a little bit easier" for households by trying to limit energy price rises, make child care and medicines cheaper and encouraging wage growth.

But the government's room for action is constrained by the risk that increased spending could further fuel inflation, and Dr Chalmers said the government was looking to trim expenditure in its May budget.

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The RBA governor wound back some of the central bank's earlier concerns regarding the possibility of a damaging upward spiral of wages and prices developing.

Although the labour market remains very tight, Dr Lowe said the risk of a "prices-wages spiral remains low".

The governor also struck an optimistic note on how demand pressures in the economy are evolving.

The surge in spending following the pandemic has "now largely run its course" and higher interest rates, cost-of-living pressures and falling house prices were combining to weigh on consumption, Dr Lowe said.

But the central bank is closely watching spending on services, which surged after the easing of COVID-related restrictions and is back to pre-pandemic levels.

Overall, though, the RBA expects "a period of subdued consumption growth [which] will help establish a better balance between supply and demand ... and support the return of inflation to target", Dr Lowe said.

The RBA does not predict inflation to fall below 3 per cent until mid-2025 and Dr Lowe admitted that the intervening period would be difficult for many.

He said that, as a result of 10 successive rate hikes, mortgage repayments will reach a record-high 9.5 per cent of household disposable income later this year.

Suicide Prevention Australia said its Community Tracker for the March quarter showed almost half of those surveyed reported experiencing elevated distress because of cost-of-living pressures, which is now ranked as one of the top three suicide risks.

Dr Lowe, who is due to meet Suicide Prevention Australia in early May, said the RBA was "very alert to that and it weighs very heavily on my heart and the hearts of the board members".

But he added that "inflation is still too high and, while it looks to be on a declining path, it is likely to remain higher than target for a few years".

"If we don't get inflation down fairly soon, the end result will be even higher interest rates and more unemployment."