By Andrew Brown in Canberra

FINANCE Minister Katy Gallagher has welcomed the possibility of the Reserve Bank slowing down on further interest rate rises, following the bank’s governor indicating a pause was moving closer.

However, Senator Gallagher has said further savings would be needed to avoid further inflation and to ward off “booby traps” left by the former coalition government.

Reserve Bank Governor Philip Lowe used a speech on Wednesday to discuss the possibility of holding off on more interest rate hikes, following the 10th consecutive rise.

NAB has become the first of the big four banks to pass on the 0.25 percentage point hike to its variable-rate home loan customers, with the other major banks likely to follow suit.

The bank has also increased rates across various deposit products, improving returns for savers.

The finance minister said while the central bank would be making its own decisions based on economic data, the softening of language by Dr Lowe was a welcome sign.

“It’s something we’d want the bank to be doing, I would suggest, because when they’re making decisions, obviously those decisions impact on all of us,” she told ABC Radio on Thursday.

“I don’t think it’s unusual for people to be wanting to see a pause because of the impact that these interest rates are having.”

Interest rates have risen from historic lows of 0.1 per cent in May 2022 to reach 3.6 per cent this month.

Senator Gallagher said there was a need for fiscal repair in May’s federal budget and a responsibility to lessen the impact of inflation.

“There are areas where we can make sensible savings and I’m not going to pretend it is easy,” she said.

“We’ve got a whole range of booby traps that were left by the former government for us that we’re working through now.

“We don’t want to make through budget decisions the inflation problem worse, so we have a responsibility to make sure that the spending we do is quality spending.”

Inflation levels reached a high of 8.4 per cent in December, but recent figures have shown a drop to 7.4 per cent for the month of January.

The Reserve Bank governor said the decline was a welcome one, but needed to be looked at cautiously.

Dr Lowe said it was still possible to lower inflation back to within the target range of between two and three per cent without a spike in the unemployment rate.