Federal Treasurer Wayne Swan said the central bank interest rate rise on Tuesday would be tough on Australian families and businesses.

The Reserve Bank of Australia (RBA) increased the cash rate to 3.50 percent - the second rate hike in many months.

Based on the increased cash rate, Swan said the cost of an average home loan of 300,000 Australian dollars (270,000 U.S. dollars) would increase by 46 Australian dollars (41 U.S. dollars) per month.

"Today's decision is a tough one for Australian families and businesses but it's also another indication that rates could not stay at 50-year emergency lows forever," Swan told reporters.

"Because the economy is recovering we'll see changes to rates from time to time."

RBA governor Glenn Stevens has warned that interest rates could not stay at emergency lows forever, Swan said.

"I don't believe that any bank should have any justification to increase interest rates over and above the increase in the cash rate delivered by the Reserve Bank today," he said.

Swan noted it was important to remain realistic and have policy to support jobs and business, which Australia has through the fiscal and monetary stimulus measures.

"Monetary policy and fiscal policy are working together to expand our economy because private sector demand in our economy has been very weak," he said.