Housing should be cheaper: RBA

GETTING a roof over your head in a country as vast as Australia should be a lot cheaper, Reserve Bank boss Glenn Stevens says, and it's time governments pulled their socks up.

MR Stevens named rising house prices as the "biggest enemy" of first home buyers in his bi-annual parliamentary testimony on Friday.

Undersupply of land and a lack of infrastructure were the main barriers to housing affordability, particularly in Sydney, he said, and it was up to governments to address this.

"The biggest enemy for first home buyers is rising house values," Mr Stevens told the hearing in Sydney.

"A country with this much land, it ought to be cheap to get a roof over your head.

"It's an important social issue how (the younger) generation will afford to house itself if you want to live in a city where the supply side of the market is unduly constrained."

First home buyer numbers have fallen to record lows in the past year as investors, driven by low interest rates, price them out of the market.

Mr Stevens dismissed the idea of introducing tax breaks or more grants for first home buyers, saying they would only push prices even higher.

What was needed was more supply of well-located land on which homes could be built, as well as infrastructure to service those areas, he said.

Deputy RBA governor Philip Lowe said investment in more public transport was another important factor.

"I think as a society, one of the things we can do is invest more effectively in transportation to increase the supply of well-located land and put downward pressure on land prices and make housing more affordable," he said.

Mr Stevens expressed concern about Sydney's "very strong" property price increases.

But that concern did not outweigh the RBA's need to cut Australia's cash rate to a new record low of 2.25 per cent at its February meeting, he said.

While acknowledging that low interest rates may be having less impact on boosting demand than in the past, Mr Stevens said further cuts could still help the economy along, leaving the door open on another possible rate cut, which is widely expected by economists.

And he seemed to think lenders were doing their bit when it came to passing any rate cuts on to customers, saying there was plenty of competition in the lending market, particularly for mortgages.