The Morrison government's election win killed Labor's plan to shut the gate on negative gearing and reduce tax breaks for capital gains. The Australian Prudential Regulation Authority lowered the safety margins it required on home loans as insurance against rate rises. And Reserve Bank governor Philip Lowe made it very clear that the bank is about to cut interest rates.

AMP chief economist Shane Oliver forecasts that prices will bottom out at not much below current prices by the end of 2019. That would allay fears of further price falls dragging down the economy, but it would also end the progress made on housing affordability.

Will the Morrison government and the Reserve Bank now aim to create stability in housing prices - just as the Reserve Bank aims for price stability in more humdrum purchases? Or will the housing market once again be conscripted to lead the fight against the threat of recession - with housing affordability sacrificed as collateral damage?

In 1980, the median home cost less than three years of median household income. Home ownership was not universal, but it was close. The 1981 census found 75 per cent home ownership among thirty-five to forty-four year olds, and 61 per cent even among twenty-five to thirty-four year-olds.

Then housing prices took off. Despite a pause when Labor ended tax breaks for negative gearing, the boom continued when it restored those tax breaks. Prices had roughly doubled by 1989, when the Reserve Bank lifted mortgage rates to 17 per cent. Seven years of roughly stable markets allowed incomes to catch up a bit.

Then prices took off again, in a decade-long boom that essentially ran until rising interest rates choked it at the end of 2007. By then the median house cost two and a half times as much as it had in 1996, and five times as much as it had in 1986.

A long period of slowly declining or stable prices was needed, to allow household incomes to catch up. Instead, we were hit by the global financial crisis. Interest rates went down, so housing prices went up. The Reserve soon slammed on the brake, raising interest rates by far more than the economy required, and prices edged down. But in 2012 a crucial policy choice intervened.

The mining investment boom had seen the Australian dollar soar to levels that made Australian industries across the board globally uncompetitive. This was a colossal boom, and we were facing a colossal bust. The Reserve Bank repealed every one of its interest rate hikes, and then some. In the next four years, the volume of housing construction and property transfers shot up by 35 per cent.

Alas, this created another boom in home prices. By December 2017, buying a home required six or seven years of the median household income, not two or three. Young buyers could not compete with rental investors enjoying tax breaks on rental losses and capital gains. For a while, most of the money banks lent for housing purchases went to investors, not owner-occupiers. Sir Robert Menzies would have turned in his grave.

Another long correction was needed. And a year and a half of falling prices has made some progress in improving affordability. Now, housing analysts Core Logic say that the pace of decline has slowed, easing fears of a hard landing in which investors might panic and rush for the exits.

Some say Labor's plan to shut off tax breaks on negative gearing for new purchases was a factor in the price fall. Certainly, the plan would weaken the incentive for investors to jump in, and hence reduce the frequency and size of future booms, creating a period of price stability in which renters could again afford to become first home buyers.

Lowe implied last week that the looming rate cuts will be aimed not at the housing markets but at stimulating the economy in general. The Reserve Bank is sufficiently worried by the trends in global markets and at home that it is prepared to use up scarce ammo to try to boost activity.

The federal budget also did its bit, with a tax break offering up to $1080 to low and middle income earners, and a $284 grant to people on welfare. Deloitte's Chris Richardson estimates that this is equivalent to a 2 per cent rise in after-tax wages: significant at a time like this.

But the long-term issues must be faced. If the PM and his team want to keep negative gearing, do they want it to play as big a role as in the past?

In the four years to 2016-17, the tax office notes that a quarter of the growth in negatively geared taxpayers was among people who owned three or more investment properties. Morrison as treasurer tried to cap this, but was blocked by opposition from MPs and senators, one of whom owned 50 properties. To revive his plan would be a small step, but a useful one that sends a message.

And the message from both the government and the banks needs to be: we don't want any more housing booms. We want to make homes affordable for ordinary Australians.