The Reserve Bank isn't sure what effect fiddling with tax breaks for property investors would have on the housing market.
Governor Philip Lowe has told a parliamentary economics committee changes to negative gearing and capital gains tax concessions should reduce investor demand in housing.
But "if we were to remove or alter that combination, I find it hard to know what effect it would have on the housing market," he told the hearing in Sydney on Friday.
Dr Lowe described housing affordability as a "very big social issue", saying parents were increasingly concerned about how their children would afford a home.
"I've got three teenage children and at some point, they will want their own house," he said.
"My kids are going to be ok because I'm paid a lot of money, so I'll be able to help them, but a lot of kids won't be able to be helped by their parents.
"Many people are spending too much of their income on housing."
Dr Lowe said the key to solving the problem was increasing supply.
The responsibility lay with state governments, he added, pointing to transport, zoning and the creation of jobs.
He rejected suggestions slashing immigration would solve the problem, describing that as a temporary fix.
"Our immigration program, I see, as a source of strength," Dr Lowe said.
"To give that advantage up just so we can take some pressure off housing prices, I find that problematic."
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