As inflation and interest rates continue to rise, the government has flagged it would look to rein in spending due to large levels of Commonwealth debt.

The prime minister said he was aiming to be up front about possible cost-cutting measures in the federal budget.

“We’ve inherited $1 trillion of Liberal Party debt. When the interest rate rises, so do the repayment costs of that Liberal Party debt,” he told reporters at a press conference in Canberra on Wednesday.

“What that means is that we can’t do everything that we would like to do.”

It comes as the Reserve Bank on Tuesday raised the official interest rate for the fifth consecutive month.

The cash rate now stands at 2.35 per cent, a rise from the record lows of 0.1 per cent earlier this year.

The government is under pressure to retain a cut to the fuel excise, which expires at the end of the month.

The end of the fuel excise cut is set to increase petrol prices by about 25 cents per litre.

Albanese said cost of living would be a focus of the budget.

“We’ll be going through line by line, looking for the waste which was there from the former government, looking for their largesse and these funds (used) just for political purposes and not for the national interest,” he said.

“All of the former government’s commitments are under review.”

Finance Minister Katy Gallagher said there would be difficult decisions going into the October budget.

“So some of those difficult decisions are how we reprioritise, how we make savings and how we make room for all of the other good ideas that people are coming forward with,” she told ABC TV on Wednesday.

“This budget situation is not going to be fixed in the short term. These are going to be decisions that we have to make in an ongoing sense across the forward estimates.”