The IPA claims that federal government spending will drive mortgage payments through inflation and is calling on the Finance Minister to cut spending ahead of the budget to be released on Tuesday.

"The forecast increase in federal government spending will drive inflation, leading to an increase in average mortgage repayments of more than $3,000 a year for the next three years," said Daniel Wild, deputy executive director of the IPA.

The IPA has released an economic study entitled "Australia's Spending Crisis" which reveals that federal government spending in last October's budget will result in an increase in average household mortgage repayments of $257 per month, or $3088 per year, over the next three years.

"Australia is in the midst of a cost of living crisis, with the cost of basic household goods and energy rising beyond the reach of many Australians," Mr Wild said.

"The Treasurer must cut spending in this week's federal budget if we have any hope of addressing runaway inflation and household costs."

He said an estimated increase in federal spending of at least 4.6 per cent a year could push Australia's inflation rate up by a further 1.6 percentage points over the next three years.

"Reckless levels of government spending are the root cause of Australia's current high inflation rate, and households and businesses are left to foot the bill," Mr Wild said.

"All levels of government must exercise responsible economic leadership through fiscal discipline.

"The Federal Government has the opportunity this week to take the lead in tackling the inflation and cost of living crisis before it is too late."

"Government spending on the response to the Covid pandemic has led to an increase in the typical monthly mortgage repayment of $554, or more than $6600 per year, which is the spark that ignited Australia's current inflation and cost of living crisis," Mr Wild said.

"Australian households and businesses are facing severe and immediate cost of living pressures caused by rapidly rising inflation, energy costs and rising mortgage repayments."

"The government needs to cut spending now or we will face an era of a hyperinflationary economy where higher and rising interest rates will become the norm."

Consumer price index (CPI) inflation reached 7.8% as of December 2022.

The IPA's research shows that housing costs "experienced the highest increase of all categories of goods and services included in the CPI consumer basket".