John Fraser, Secretary to the Treasury, during a Senate estimates hearing at Parliament House in Canberra. Credit:Alex Ellinghausen "That said, asset values can always fall, and often do, while debt values generally don't, squeezing net worth in the process and perhaps more importantly, around 75 per cent of household assets are in housing and superannuation," he said. For these reasons, he said, Australian financial regulators are alive to the risks presented by household sector debt, and will continue to closely enforce sound lending practices by Australian financial institutions. Treasurer Scott Morrison in March ordered the Australian Prudential Regulation Authority to slam the brakes on investor lending by restricting interest-only loans to less than 30 per cent of new home loan approvals while also tightening access to high-risk loans. "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," he said.

US President Donald Trump has pushed for the company tax rate to drop to 20 per cent. Credit:Martin H. Simon He warned homeowners that at some point "in the next hundred years interest rates will go up". "People should be wise to prepare themselves for that, it's something to watch, but it's not a reason to be comfortable," he said. Treasurer Scott Morrison Credit:Alex Ellinghausen Mr Fraser said Treasury had begun studying a migration of homebuyers out of east coast capitals to regional centres that could help to ease house prices.

He conceded the government had overlooked promoting smaller regional cities, as they do in Europe, for too long. "I don't want to over-egg it, but there are people moving [to towns such as Orange in NSW and Ballarat in Victoria], and they call them 'easterners,' he said. "My gut feeling is we are seeing non-trivial migration. It might be wishful thinking but I'm hoping it's a trend. I think it will help on a number of fronts, not least with housing affordability." 'Tax cuts needed'

Mr Fraser backed the Coalition's company tax cuts in light of similar moves across the rest of the world. "I'm not going to say we don't live on an island because clearly we do, but we are obviously part of the world economy," he said. "It is a cost of doing business. If Australia is to remain competitive we have to be mindful of what is happening elsewhere." He said the Trump administration's proposed tax cuts "run the risk of sucking in a lot of capital flows that might have gone elsewhere". US President Donald Trump has called for the corporate tax rate to to be slashed to 20 per cent from 35 per cent. The Turnbull government has proposed cutting the company tax rate to 25 per cent from 30 per cent for all companies by 2026.

Mr Fraser was unequivocal on personal income tax rises. Up to 1.6 million Australians will have their tax increase as their pay moves into the next tax bracket from next year. "I don't think it's good, seriously," he said, while conceeding bracket creep had done a lot of the heavy lifting for budget repair. "The economy, people, jobs, benefit from lower taxes and bracket creep is a means of raising taxes by stealth," he said. Mr Fraser said he was confident long-awaited wage growth would soon start to return. "The Wage Price Index increased by 1.9 per cent through the year to the June quarter 2017, which remains the lowest rate of growth since the start of the index in 1997," he said.

The anemic growth is barely keeping pace with inflation, making everyday items more expensive for Australians. "Just as wages slowed in response to the period of slower growth and slack in the labour market in recent years, we expect that a period of stronger growth and falling unemployment will lift wages in the next few years," he said. He acknowledged Treasury and policymakers had been puzzled by torpid growth at a time when economic productivity had started to increase. "It's a hard one, to be blunt, if we had the answer we would tell you," he said.

"We haven't re-invented the business cycle. I don't want to over-egg it but I think wages are starting to pick up a little." He said he was encouraged by the pockets of wages growth Treasury was starting to see in areas such as construction. Loading Globally, he said, Australia was well-placed to manage any economic shocks but tensions on the Korean peninsula were a particular source of uncertainty. "While any escalation is concerning, Australia has weathered these periods with our open and flexible economy standing us in good stead," he said.