The new Treasury boss is confident Australia can retain its triple-A credit rating even as he worries about the level of government debt.
John Fraser, making his first appearance before a Senate estimates hearing in the key Treasury role, remembers what happened in past decades when interest rates shot up and the massive servicing of government debt swallowed up money that could have been spent better elsewhere.
"I'm old fashioned. I don't like public debt," he said on Wednesday.
At the moment, the average cost of servicing government debt - estimated to be about $370 billion - is about three per cent per annum.
"When interest rates go up, that debt will go up with it. That is where we are exposed," Mr Fraser said.
But he does believe the economy is solid, even though growth is likely to remain below its long-term trend of 3.25 per cent for the time being.
Australia is one of very few countries that still enjoys a top-notch rating from the world's three main credit rating agencies - Standard & Poor's, Moody's Investors Service and Fitch Ratings.
"It would have to be a pretty terrible event to knock our triple-A rating. I don't see that happening."
Mr Fraser is also not too concerned about developments in the housing market, although he doesn't think sharply rising prices - especially in Sydney - are healthy.
"I don't rate it that highly as a huge risk," he said.
The Treasury boss is confident measures taken by the Australia Prudential Regulation Authority to curb investment lending will be successful.
Separately, the Abbott government announced new application fees for foreign investors seeking to buy residential properties and penalties of up to 25 per cent of the value of the property, plus the enforced sale of the property, for breaches of foreign investment rules.
"We need to make sure that all foreign investors are following the rules," Prime Minister Tony Abbott said as he released a discussion paper in Sydney.
New figures showed that home building is propping up the construction sector, a positive for next week's national accounts that include economic growth figures for December quarter.
However, other data showed another quarter of tame wages growth, matching the record low annual pace of 2.5 per cent set in the June quarter 2104.
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