The country's central bank lifted the cash rate from 0.1 to 0.35 percent at its board meeting on Tuesday, the first time interest rates have risen since 2010.
RBA governor Philip Lowe said there was evidence of wages growth picking up and the economy was proving to be resilient, with inflation rising quicker than expected.
While Tuesday's rate hike was the first in nearly 12 years, Mr Lowe said the interest rates would increase further.
"It's not unreasonable to expect the normalisation of interest rates over the period could see them rise to 2.5 percent," he said.
"That would be more normal levels. How fast we will get there will be determined by events."
The increase was the first time interest rates have risen during an election campaign since 2007, when at the time, then-prime minister John Howard said he was sorry about the rise.
Speaking to reporters in Melbourne alongside Treasurer Josh Frydenberg, Prime Minister Scott Morrison said he understood the effect the rise in rates would have on mortgage holders.
"Of course I have sympathy with that (rate rise impact) ... and we expressed our concern about that in what we did in this year's budget," the prime minister said.
"I sympathise with Australians as they face high cost of living pressures. I sympathise with Australians when they face higher repayments on their homes."
Mr Lowe said the election campaign, now in its fourth week, had no bearing on the Reserve Bank's decision to lift the cash rate, stressing the bank was independent.
"The election had no influence on the decision today, the Reserve Bank was given a mandate by parliament to achieve price stability, full employment and promote the economic welfare of the Australian people," he said.
"We don't take the political situation into account, we do what is right for the country."
Mr Morrison said Australians would have been preparing for a rise in interest rates for some time, given the historically low levels.
"A 25 basis point increase in the cash rate, for those who will be paying more, that will be harder, and we understand that," he said.
"That is why tax reduction has been a key objective of our government and is ongoing."
Labor leader Anthony Albanese said it was hard enough already to make ends meet under Mr Morrison.
"Today it got even harder for millions of Australians," he said.
"Even before today's decision Australians were facing a full-blown cost of living crisis on his watch. Scott Morrison's economic credibility was already in tatters, now it's completely shredded."
Shadow treasurer Jim Chalmers said the coalition was focused on politics, despite Mr Morrison saying it had nothing to do with political interests.
"They see this exclusively as a political challenge," he said.
"Scott Morrison saying he's not focused on the politics is like Homer Simpson saying he is not focused on the donuts."
ACTU secretary Sally McManus said house prices had risen six times faster than wages under the Morrison government.
"If Scott Morrison hadn't been completely missing in action on wages, Australian workers paying off a mortgage would have been better prepared for today's interest rate rise," she said.
Assistant Treasurer Michael Sukkar said there was an expectation that property prices would moderate, following rises during the COVID-19 pandemic.
"A moderation in house price growth is something I have been talking about for months now," he told Sky News.
Business Council of Australia chief executive Jennifer Westacott said the decision underlined global volatility.
"The RBA has drawn a line under two years of emergency pandemic settings, now action is needed to manage the growing cost of living pressures on everyday Australians," she said.
