Treasury secretary John Fraser has indicated he could seek further regulatory efforts to curb risky property lending.
It came as he warned that debt levels make households vulnerable.
Fraser told a Senate committee hearing today that even though Australian households hold more than $12 trillion in assets - including housing and superannuation - the $2 trillion in outstanding debt means they have become more vulnerable to increases in interest rates in future.
"While there are risks in the global outlook, the greatest impact we can have on our own circumstances will come from getting our own house in order," Mr Fraser told a Senate estimates hearing in Canberra today.
"The Reserve Bank will be mindful of this when thinking about domestic monetary policy, though global monetary conditions can also impact upon the wholesale funding costs of Australian banks," he said.
Fraser also told the committee that he expects wages growth to pick up as unemployment falls.
Fraser advised he had been encouraged by signs of a pick-up in wages growth in some major cities and regional centres.
Mr Fraser said he was aware of signs of wages growth in the construction sector in Victoria, among semi-skilled workers in north-west Sydney and construction workers in regional centres.
"I don't want to over-egg it but I think it is starting to pick-up a little," he said.
The Guardian reported Treasury officials admitted they were caught off-guard by the extent of the wages slowdown since the global financial crisis, saying the economic “scars” from the crisis have run deeper than expected in Australia.
On house price growth Fraser suggested it "appears" to have eased in the big cities.
He said there were "welcome signs" of moderation in investor and interest-only borrowing, but that it was still too soon to relax.
"While banks' progress against these measures has been positive, regulators will need to think carefully about whether future efforts to maintain financial stability should lean against cyclical excesses or address structural risks within the financial system," Fraser said.
Fraser was speaking ahead the latest quarterly inflation figures.
According to the Australian Bureau of Statistics (ABS), headline CPI rose by 0.6 percent over the September quarter, leaving the change on a year earlier at 1.8 percent.
Economists were anticipating an increase of 0.8 percent.
The quarterly increase was driven by higher utility, tobacco, and travel prices, offsetting weakness in vegetable, fuel and telecommunication costs.
