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Australia could be heading back to the runaway inflation of the 1970s and 1980s if people lose faith in the Reserve Bank, a top central bank official says.

Speaking at a panel of economists during the International Monetary Fund spring meetings in Washington DC, Reserve Bank of Australia chief economist Sarah Hunter said managing inflation expectations had to be the bank's "North Star" as it responds to the Iran war shock.

The RBA had managed to get inflation down post-COVID while keeping unemployment low only because inflation expectations remained anchored.

Even though inflation was spiking in the short term, households had faith the bank would get them back under control eventually.

"If we lose that, we go back to a world of the 1970s and 1980s, where it's much more costly," she said early on Friday morning, Australian time.

Headline inflation was at 3.7 per cent in February.

That's higher than the Reserve Bank's 2.5 per cent target but still far lower than the 17.7 per cent peak in 1975 or the 1982-83 recession, when inflation exceeded 12 per cent.

However, consumers were still recovering from the post-COVID inflation spike, when price growth peaked at 7.8 per cent - the highest level since the RBA began targeting inflation in 1993.

Adding to the bank's dilemma was the income shock households were facing as a result of the energy crisis, which will slow growth and put more people out of work.