Sydney property prices have gone "crazy", but record low interest rates aren't entirely to blame, Reserve Bank boss Glenn Stevens says.
The RBA governor waded into the property debate on Wednesday, telling a business lunch that he finds Sydney's soaring prices concerning.
However the RBA remains open to cutting rates further and always took into account what was happening in property markets across the country - not just Sydney - when deciding whether to adjust the cash rate, he said.
"What is happening in housing in Sydney I find acutely concerning for a host of reasons, many of which are not to do with monetary policy," he told the Economic Society of Australia.
"I think it's a social problem.
"I think some of what's happening is crazy, but we have a national focus and so that just increases the complexity."
His comments came as HSBC research found Australian home prices have risen 24 per cent in the past three years, though the gains have mostly been confined to Sydney and Melbourne.
Sydney prices had jumped 39 per cent, while Melbourne prices were up 22 per cent.
Treasury boss John Fraser last week said Sydney and wealthier parts of Melbourne were "unequivocally" in a housing bubble.
ANZ chief executive Mike Smith doesn't believe Sydney is in "bubble" territory yet, but says the market needs to be watched closely.
However, he says house prices are all relative.
"I was speaking to an investor the other day who was saying: "Oh, house prices are getting higher in Sydney, but compared to Hong Kong and compared to New York, Sydney's quite good value'," Mr Smith told a business lunch in Sydney on Wednesday.
While Treasurer Joe Hockey has downplayed fears of a bubble, he has sparked a wave of controversy by telling frustrated first-time buyers that all they need is "a good job that pays good money" if they want to buy a home in Sydney.
In the meantime, the RBA remains open to cutting interest rates even further to help give the economy a boost.
"We remain open to the possibility of further policy easing, if that is, on balance, beneficial for sustainable growth," Mr Stevens said.
"I think it's quite some time before we even think about interest rates going up."
However he warned that there were limits to the effectiveness of any future moves in the cash rate and renewed his calls for governments to start spending on major infrastructure projects to help the economy.
Mr Stevens said the outlook for June quarter economic growth was likely to be worse than the RBA had predicted two years ago, pointing to weak business investment, and government investment falling eight per cent in the past year.
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