Westpac chief executive Brian Hartzer has urged governments to consider a major overhaul of housing taxation, making the case for replacing stamp duty with a broad-based land tax.

As policymakers grapple with how to fire up a sagging economy, Mr Hartzer on Tuesday argued that getting rid of stamp duty could help address the high cost of housing, and allow more first home buyers to enter the market.

At a business lunch in Sydney, Mr Hartzer said recent declines in house prices made them "a bit more affordable" for first home buyers, but with prices now stabilising in Sydney and Melbourne, other changes were needed to make homes more affordable in the longer term.

First home buyers are a key target market for banks as they try to expand their lucrative mortgage books.