Reserve Bank boss Glenn Stevens has warned against excessive risk-taking in the housing market while interest rates are low.
The RBA is aware that monetary policy works by affecting financial risk-taking behaviour, and does not want to foster too much of a build-up of risk, he said.
"That could leave the economy exposed to nasty shocks in the future," Mr Stevens said in a speech in Adelaide.
"The more prudent approach is to try to avoid, so far as we can, that particular boom-bust cycle.
"It is stating the obvious that at present, while we may desire to see a faster reduction in the rate of unemployment, further inflating an already elevated level of housing prices seems an unwise route to try to achieve that."
Low interest rates can make funding easier to find, and smooth the way to expansion of credit, but it can't add to the supply of land and houses, or improve the responsiveness of the construction sector to demand for new housing, he said.
"Other policies have to do that - and it's important that they do if we are to see easy credit resulting in more dwellings as opposed to just higher prices for the existing dwellings."
Monetary policy could also not ensure policies for creating necessary infrastructure or generating the technological change and innovation necessary for the wellbeing of the country's citizens, Mr Stevens said.
"Other policy areas have to be right - and then the innovators and their backers have to be willing take the necessary risk," he said.
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