The Reserve Bank of Australia is tipped to hike rates on Tuesday

Retail prices grew 1.1 per cent in the December quarter and the volumes of sales actually declined as rising living costs convinced households to pare back their spending, according to the Australian Bureau of Statistics.

The result came as the Reserve Bank of Australia Board prepares to meet for the first time this year amid expectations it will increase its cash rate to 3.35 per cent.

There is mounting evidence that a succession of rate rises since May last year are bearing down on the economy: house prices are tumbling, business investment plans are being scaled back, labour demand is slowing and building lending and approvals are dropping.

A National Australia Bank survey found that households are also adjusting their spending habits.

According to the report, around 40 per cent have taken steps such as cutting back on coffees, making lunch at home and driving less. Slightly fewer have scaled back holiday plans, put off buying major new appliances and cut back on food deliveries.

But a late 2022 surge in inflation to 7.8 per cent has economists concerned that the Reserve Bank will need to tighten monetary policy further in order to bring price growth down to within its 2 to 3 per cent target band.

The RBA Shadow Board, prepared by the Australian National University's Centre of Applied Macroeconomic Analysis, thinks that a 0.25 of a percentage point increase in the cash rate to 3.35 per cent is the appropriate move and expects it will eventually reach 3.85 per cent.

A panel of 29 economists surveyed by The Conversation also predicts a rate increase tomorrow and their average forecast is for it to reach 3.6 per cent this year before declining close to its current level in 2024.

Commonwealth Bank economist Stephen Wu said the base case was for a 0.25 of a percentage point increase but there was a "non-trivial" risk the RBA could hike its cash rate by 0.4 of a percentage point, taking it to 3.5 per cent.

But, offering a brighter outlook for borrowers, Mr Wu said the expected rate rise would be the last in this cycle and flagged the RBA was likely to begin easing monetary policy late this year.

CPA Australia senior manager, business policy Gavan Ord said uncertainty about the economic outlook among businesses and consumers was affecting confidence.

Mr Ord said a recent survey of 1300 people found that although a majority expected their employment to remain "stable", almost one in five felt insecure about their job.

"It's unsurprising some workers are feeing nervous about their future employment given the current economic challenges," he said.

Opposition treasury spokesman Angus Taylor accused the government of making things worse by not mapping a path to a budget surplus.

"If you want to take pressure off interest rates, if you want to take pressure off inflation, you have to have a government that has a goal of getting back to and staying in budget surplus," Mr Taylor said.