Glenn Stevens also dismissed talk of a housing bubble poised to pop. He said house prices were not unreasonably high.

''Australian dwelling prices on a national basis have in fact declined and are now about where they were in 2002. That is, housing has become more 'affordable','' he said.

''Four or five years ago we supposedly had a housing affordability 'crisis'. Now it seems that the problem some people fear is that of housing becoming even more affordable.''

Speaking at a business lunch in Sydney, Mr Stevens said he was unconvinced house prices were over-valued, even if the ratio of home prices to income, on a national basis, was higher in Australia than it was 15 or 20 years ago.

He said when comparing Australian house prices to income levels with those in comparable countries, Australia appeared to be in the middle of the pack.

''It has to be said that the housing market bubble, if that's what it is, seems to be taking quite a long time to pop - if that's what it is going to do,'' he said. ''The ingredients we would look for as signalling an imminent crash seem, if anything, less in evidence now than five years ago.''

Critics have warned for years that the Australian housing market is in a bubble, much like the credit bubbles seen in Europe and the US before the global financial crisis. Adrian Blundell-Wignall, an official from the Organisation for Economic Co-Operation and Development, and formerly with the Reserve Bank, said earlier this month he feared for Australia's housing market if global growth seriously faltered.

''The world is so globalised and interconnected that if it goes down, then things will get much worse for Australia … [and] the biggest problem in Australia, that worries me personally … is the Australian property market,'' Dr Blundell-Wignall said.

''You'll never get an auction price collapse but nevertheless you can think Australian house prices will be going sideways in nominal terms or maybe down in nominal terms, and in real terms they'll be going down quite a bit over some years. You know, if unemployment rises, then that will accelerate.''

But a Reserve Bank assistant governor, Guy Debelle, told a mortgage conference in Adelaide last month that the only signs of over-supply in Australia's housing market were in south-east Queensland, and that nationally there were not enough houses to go around.

''Nationally the level of housing construction is about where it was 10 years ago, but the population is 15 per cent higher,'' he said.

Mr Stevens said he was unconcerned about that, and that Australia's exchange rate would help to soften any blow from a volatile swing in Chinese demand for iron ore.

He also said fiscal policy could be used better to help to stabilise Australia's economy in times of volatility.