Federal treasurer Wayne Swan has accused Malcolm Turnbull of being out of touch with average Australian families for criticising government plans to rein in government spending in an attempt to curb inflation.

Mr Swan says the opposition treasury spokesman's criticism of the Labor's strategy proves he is "completely out of touch".

"Mr Turnbull doesn't seem to understand the impact of inflation and rising prices on working families," Mr Swan told ABC radio today.

"And if he doesn't understand that, it just proves he is completely out of touch with what's going on with average Australian families."

Yesterday, Mr Turnbull said the government would have to make massive cuts to have any effect on inflation and that would be unwise.

"I don't think there's any economic need to cut," he told the Ten Network.

"If Wayne Swan wanted to make a real impact on inflation, he would have to tighten fiscal policy and have the surplus well over two per cent.

"I don't think it would be a prudent thing to do at the moment."

But Mr Swan hit back this morning, saying spending cuts were essential because of the Howard government's financial legacy.

"What we've inherited is inflation at a 16-year high," the treasurer said. "That is something this country should be very concerned about and it simply must be dealt with in this budget, which is why we need to restrain spending."

Mr Swan said fighting inflation was "the most important thing we need to do in this budget".

He denied there was a risk the cuts could stall the economy, saying the government would "get the balance right".

A strong surplus would provide room to make future investments to expand the productive capacity of the economy, Mr Swan said.

Inflation 'growing at its fastest rate'

Mr Swan’s comments come as a new report warns inflation is growing at its fastest rate on record, as petrol prices reach new heights.

Economists say an interest rate cut by Christmas is now looking less likely.

The monthly inflation gauge from TD Securities and the Melbourne Institute shows headline inflation surging by 4.3 per cent in the last year after rising by 0.5 per cent last month.

It's the highest year-end figure in the five-year history of the gauge, and well above the Reserve Bank's two to three per cent target.

Rates expected to stay on hold

TD Securities senior strategist Joshua Williamson says it's a truly shocking result which could jeopardise the chance of a rate cut this year.

The Reserve's board is widely expected to leave interest rates on hold at 7.25 per cent when it meets tomorrow morning.

Its decision will be announced at 2:30 (AEST) tomorrow afternoon.