Treasurer Jim Chalmers has promised the Federal Budget will provide “long-term” and “sustainable” relief to address the rising cost of living.

In an interview with Sunrise, Chalmers said that the budget handed down in October will offer a “responsible” relief package that targets areas such as “medicine, childcare, getting power bills down over time, and getting wages moving again”.

“We are in the midst of a full-blown cost of living crisis,” Chalmers said.

“Inflation is going to get worse before it gets better, that’s the unfortunate reality.

“Our job as the government is to make sure that after some of this near-term cost of living runs out that was in the last budget, that it is replaced by responsible, long-term, sustainable cost of living relief in areas like medicine.

“These are all important things that we will be doing as a government. I will be handing down a budget in October and some of those things that I just mentioned will be part of a cost of living package in that budget.”

The Treasurer’s pledge comes just hours before the Reserve Bank of Australia (RBA) announced the cash rate target would be raised by 50 basis points, to 0.85 per cent, in a bid to combat rising inflation.

Governor of the RBA Philip Lowe, said in a statement: “inflation in Australia has increased significantly.”

“Higher prices for electricity and gas and recent increases in petrol prices mean that, in the near term, inflation is likely to be higher than was expected a month ago,” Lowe said.

“Today’s increase in interest rates will assist with the return of inflation to target over time.”

Lowe said the RBA’s Board will continue to monitor global factors and take further steps necessary to ensure inflation “returns to target”.

“Today’s increase in interest rates by the Board is a further step in the withdrawal of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic,” he said.

“The resilience of the economy and the higher inflation mean that this extraordinary support is no longer needed. Given the current inflation pressures in the economy, and the still very low level of interest rates, the Board decided to move by 50 basis points today.

“The Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead. The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time.”