Stubbornly high inflation is weighing heavily on the minds of Australia's central bank board and reducing the chance of a pause on interest rates any time soon.
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The minutes from the February cash rate decision revealed a pause was not formally discussed despite Reserve Bank board members considering leaving the cash rate unchanged at the December meeting.
The board considered both a larger 50 basis point interest rate hike as well as a 25 point increase to the official cash rate but landed on the smaller rise.
The board decided there was less need to revert to 50bp hikes because the RBA meets frequently and interest rates had already been lifted considerably from 0.1 per cent in April last year.
The official cash rate is now at 3.35 per cent.
Plus, board members noted inflation had likely passed its peak after hitting 7.8 per cent in the December quarter and there was a persuasive outlook for softening consumption growth.
"Many households were facing tighter budgets and, in aggregate, real incomes were falling," the minutes from the bank's February board meeting stated.
But in support of another jumbo-sized hike was inflation and wage data consistently coming in hotter than expected and the threat of sticky inflation.
"If it did persist, there would be significant costs, including higher interest rates and a larger increase in unemployment later on," board members noted.
The release of the February board meeting minutes followed two appearances of governor Philip Lowe at parliamentary hearings where he was grilled about the central bank's trajectory for monetary policy.
Despite the recent adoption of a hawkish tone and the discussion of another 50bp hike, economists said a return to larger rate hikes was unlikely.
As to how far high interest rates have to rise, the minutes reiterated the need to monitor incoming data.
ANZ senior economist Felicity Emmett said new wage data, due on Wednesday, would be front of mind given the inflation risks posed by wage growth.
"We are expecting a one per cent quarter-on-quarter and 3.5 per cent year-on-year, in line with the market and RBA," she said.
ANZ and Roy Morgan also released their consumer confidence survey on Tuesday, which rebounded by 2.3 points to 80.4.
The lead-up and fallout from the 25bp increase to the official cash rate in February wiped 8.7 points off the index over two weeks.
Four of the five confidence subindices improved, with "current financial conditions" gaining 4.9 points and "time to buy a major household item" lifting 5.7 points.
"Weekly inflation expectations" fell 0.4 points to 5.1 per cent, which Ms Timbrell said might have been a delayed response to higher interest rate hikes.
Australian Associated Press
