Housing 'challenging our recovery'

The Reserve Bank says Australia's economic future will be challenged by an under-supply of housing, despite being shielded from the worst of the the global downturn.

RBA assistant governor Philip Lowe says the rate of increase in dwellings has been below average in the past decade, while our population has increased at its fastest pace.

Mr Lowe says the housing sector will be competing with demands for skilled workers and specialised services from an expanding resources sector.

He says another challenge will be Australia's capacity to meet higher demand as the economy recovers so the economy can grow rapidly without boosting inflation.