It’s uncertain how much worse inflation and cost of living pressures will get as Australians struggle with higher mortgage payments and energy bills.

The central bank didn’t rule out further hikes after increasing the interest rate to a nine-year high on Tuesday and there’s no timeframe for government reforms into the energy market to ease prices.

Peak inflation has also been revised up to almost eight per cent by the end of the year. 

Finance Minister Katy Gallagher stood by the government’s budget, saying the decision to not offer handouts to struggling families was the right one. 

“The government will always be looking at what the right thing to do for households is,” she told ABC radio on Wednesday.

“You saw that in the deliberate decision to invest in a cost of living package.”

Senator Gallagher said all cost of living measures – including cheaper childcare, medicines and an extension to paid parental leave – needed to provide an economic return that wouldn’t add to inflation.

Assistant Treasurer Stephen Jones said the government’s job is to not make a bad situation worse by adding to inflation through rampant spending.

“We are looking at measures we can put in place to bring energy prices down,” he told Sky News on Wednesday.

“But it can’t be through a mechanism that will just pump the fires of inflation.”

Prime Minister Anthony Albanese said cash splashes would have been counterproductive. 

“It would have been easy politics to put in more cash handouts,” he told Adelaide radio station 5AA.

“But that would have hurt people in the medium term pretty quickly because it would have encouraged the Reserve Bank to put up interest rates more than it would have.”

Mr Albanese said irresponsible spending could have pushed inflation into the double digits, following Europe and North America. 

Shadow Treasurer Angus Taylor said the government had put up the white flag on curbing inflation and interest rates. 

He pointed to more than $115 million in additional spending in the budget.

“That’s not a budget to take pressure off inflation,” he told reporters on Wednesday.

Mr Taylor said the government needed to offer more incentives for pensioners to join the workforce and help ease staffing shortages.

“The budget was a missed opportunity. We need to see this government taking the bull by the horns,” he said.

“What we should have seen is a plan for shorter-term pressures on inflation and interest rates and a plan for longer-term growth with less tax.”