The Reserve Bank of Australia have left interest rates at a record low 2.5 percent on Tuesday despite reporting of continued property price rises.
The central bank said housing prices were continuing to increase in the larger cities and members considered that the risks associated with this trend warranted ongoing close observation.
"On the other hand, the exchange rate remained above most estimates of its fundamental value, particularly given the declines in key commodity prices and, overall, had offered less assistance to date than would normally be expected in achieving balanced growth in the economy," the bank said.
The RBA said a continued rise in home prices would carry significant risks for the economy.
"Additional speculative demand could amplify the property price cycle and increase the potential for property prices to fall later, " the bank said.
"The main risks in such a scenario would likely be to the stability of the macroeconomy rather than the financial system, particularly if households were to react to declines in their wealth by cutting back on their spending."