A top economist has admitted the price of milk will never return to pre-pandemic levels as Aussies are urged to simply accept their cost of living woes.

Speaking at the annual Australian Finance Industry Association Conference in Sydney on Tuesday, Sarah Hunter told attendees Aussies have to 'get used to' the situation.

'When you do your weekly shopping, it just costs that much more,' the assistant governor in economics at the Reserve Bank of Australia said.

'The cost-of-living is now higher and we are not trying to bring the price level down.'

Ms Hunter said she had noticed the price of milk had surged at her local supermarket, acknowledging it is an 'awful lot more expensive' now.

'The price of milk will not go back to where it was pre-Covid, same thing for bread, other staples, petrol and so on,' she said.

'We all have to get used to that and we know it's tough and it stings when you do your weekly shop.'

But in general, Ms Hunter said household spending has a more promising outlook, adding: 'Generally the measures of stress are starting to come off'.

The price of milk at local supermarkets will not return to pre-Covid levels, the RBA has warned (pictured, milk on the shelves in a Coles supermarket)

Top economist for the Reserve Bank, Sarah Hunter, (pictured) said weekly groceries will generally be costing Australians more due to the higher cost of living

'There are always people in difficult circumstances. We know that and it can be particularly challenging... those people are still there,' she said.

'(But) household conditions look like they are starting to improve, with a number of the fundamentals having started to turn over the last year or so.

'We are now in a position where wages are growing faster than prices... so the average worker is taking more home in real terms than they were a year ago.

'We also have the stage three tax cuts that came in a year ago... if you have a variable mortgage, you've had three interest rate cuts.'

Bringing inflation down to the midpoint target (between 2 and 3 per cent) remains a key priority for the Reserve Bank, she said, adding that she expects inflation will remain where it is at the moment.

'In the context of the labour market and our mandate... we're pretty close to full employment,' Ms Hunter continued.

'But maybe there have been some pockets of tightness in some parts of the labor market that we've still been able to see relatively recently.

'For example, if you try and get a tradie, that might still be a bit of a challenge. If you're in Brisbane, it's definitely still a bit of a challenge. There's still some strength in some parts of the country, (including) out west in Perth.'

Reserve Bank Governor Michele Bullock (pictured) said the RBA was now expecting underlying inflation 'to remain sustainably' in the middle of its target range, leading to more rate cuts

Bringing inflation down to the midpoint target (between 2 and 3 per cent) remains a key priority for Australia's Reserve Bank (pictured, a shopper in Coles)

Brutal cost-of-living warning that will impact every Australian: 'The system is broken'

The RBA cut the cash rate by another 25 basis points in August, taking it back to 3.6 per cent for the first time since May 2023, following a unanimous decision of the nine-member monetary policy board.

The latest cut means a borrower with an average $660,000 mortgage will save $106 on their monthly home loan repayments.

This followed relief in February and May, and avoided a repeat of July when the Reserve Bank left rates on hold - surprising financial markets.

Reserve Bank Governor Michele Bullock said the RBA was now expecting underlying inflation 'to remain sustainably' in the middle of its target range, leading to more rate cuts.

'The forecasts imply that the cash rate might need to be a bit lower than it is today to keep inflation low and stable and to keep employment growing,' she said.

The headline inflation rate of 2.1 was also at a four-year low, helped by $75 quarterly electricity rebates that have been extended until the end of 2025.

Aussies need to 'get used to' price hikes at the checkout, RBA warns