Prime Minister Scott Morrison has moved to freeze the deeming rate for almost 900,000 social security recipients after the Reserve Bank lifted interest rates for the first time in more than a decade.

The deeming rates used to determine income from financial assets will be frozen for the next two years, in an attempt to ensure payments for aged pensioners and other recipients won’t be reduced.

The deeming rate freeze is expected to apply to 885,000 people. The lower rate will remain at 0.25 per cent, while the upper rate will stay at 2.25 per cent.

According to the federal government, it means some seniors could keep up to $1300 a year that they would otherwise lose

It comes after the Reserve Bank of Australia raised the official cash interest rate from a historic low of 0.1 per cent to 0.35 per cent – the first time rise since 2010 – on Tuesday, ahead of the May 21 federal election.

Mr Morrison expressed sympathy with mortgage holders facing increased monthly repayments as a result.

The opposition pounced, with Labor leader Anthony Albanese saying it will make it harder for millions of Australians to make ends meet.

Mr Morrison said the freeze on deeming rates for social security payments would ensure people could deal with rising costs.

“This is another shield to help protect Australians from the cost of living pressures people could feel from an increase in interest rates,” he said.

“We will guarantee the rate of income for people who could otherwise see their social security income drop because of the increase in interest rates.”

Labor was quick to match the pledge.

“We have always said where there are good ideas, we will support them,” Opposition home affairs spokeswoman Kristina Keneally told ABC News Breakfast on Wednesday.

However, RBA governor Philip Lowe warned of further rate hikes in the coming months.

“It’s not unreasonable to expect the normalisation of interest rates over the period could see them rise to 2.5 per cent,” he said.

“How fast we will get there will be determined by events.”

Asked what difference it would make whichever party was in government, shadow treasurer Jim Chalmers said the Coalition didn’t understand the pressure people were under.

“We think the difference between Labor and the government is that the government is trying to wash their hands of this challenge … they don’t understand the pressure,” he told Nine Network on Wednesday.

“We do … Growing the economy without adding to inflation, getting real wages moving again, trying to have something to show from this [government’s] budget, which is heaving with a trillion dollars in debt.”

Mr Morrison will start campaigning in Melbourne on Wednesday while Mr Albanese will begin in Sydney.

Economic management will be firmly in the spotlight during a treasury portfolio debate on Wednesday.

Treasurer Josh Frydenberg will square off against Dr Chalmers at the National Press Club.

-AAP