Treasurer Scott Morrison believes the policy settings that were put in place to cool the rampant housing markets in Australia's two largest cities are right but says there is always an ability to recalibrate them if necessary.
There has been a marked downturn in investor demand for housing since Australia's financial regulators imposed restrictions, such as on interest-only loans, which has helped to take the heat out of the Sydney and Melbourne markets.
Figures on Tuesday showed Sydney prices dropped 1.2 per cent in the March quarter to post the first annual decline in six years of 0.5 per cent.
Melbourne values eased 0.6 per cent but still showed an annual rise of 6.2 per cent.
Economists at ANZ warned prices in these two could fall by a total 10 per cent from their peak because the weakness in the market has persisted longer than they had expected.
Mr Morrison declined to respond to such speculation, saying Treasury, the Reserve Bank and Australian Prudential Regulation Authority have done a lot of work on this and continue to monitor the situation.
"There is always an ability to recalibrate but at this point, we think the settings are right," Mr Morrison told AAP on Wednesday after delivering a speech to the Master Builders Association in Canberra.
He said there are a lot of other pressures that are pushing prices the other way too, such as the population growth in Melbourne.
In Sydney, prices have moved more at the top end of the market while in the middle range there hasn't been that same impact.
"There has been a necessary cooling and a welcome pause in what we had been seeing in those particular markets," Mr Morrison said in his speech.
But there has also been a welcome return from first home buyers, which accounted for 17.6 per cent of all mortgages granted in April compared to just 13.8 per cent a year earlier.
As such, he questioned why the opposition was "mindlessly persisting" with its planned changes to negative gearing and capital gains tax, calling it poor judgment.
"It also portrays that it was never about housing affordability - it was just about more tax," he said.
Labor's finance spokesman Jim Chalmers hit back, saying there has never been a treasurer who spent a greater proportion of his time focused on his political opponents.
"Every time he opens his mouth he diminishes himself," Dr Chalmers told reporters in Canberra.
"We want to make sure that housing is affordable particularly in these big markets that have seen extraordinary price growth."
