The latest housing finance figures released by the Australian Bureau of Stastics show that the slashing of the cash rate to 1.0% has had an immediate impact on home loans. In the past two months there has been a strong pick-up in people taking advantage of the record low rates. But while this will likely lead to increased house prices, we are yet to see the rate cuts lead to any substantive improvement in actual economic activity.

It is now official. The average standard variable home rate of 4.94% is the lowest ever recorded by the Reserve Bank, which goes back to 1960:

To have lived in Australia and experienced lower interest rates you would have had to have been alive at a time when you could say, “so this new rock and roll thing, do you think it will catch on?”

To buy or not to buy? The million-dollar housing question Australians keep asking Read more

Of course most people taking out new loans are getting lower rates than the standard rate – the average discounted rate is now 4.25% and the mortgage manager’s average rate is 3.46%.

This November will mark nine years since we last saw the RBA increase interest rates. And so it is good to see that rate cuts still have some sort of impact.

The latest housing finance figures released on Monday by the RBA showed the value of housing finance jumped 5.1% in July – the biggest one month increase in seasonally adjusted terms since March 2015 (the month after the RBA cut the cash rate to 2.25%):

The trend rate was a bit less exuberant, but even with this measure there has been an increase in lending for both owner-occupiers and investors:

But we should hold our excitement a little. Even with the recent increase in lending, the value of housing loans in August this year was 14% below where it was last year.

This suggests that while there will be an increase in house prices over the next six months, we still have a while to go before we have average prices above where they were a year ago:

But the problem for the RBA and the government – should it decide to be worried about the economy and not assume everything is going to plan – is that the aim of lowering interest rates is not to just increase house prices.

What the RBA wants to see is economic activity – investing and when it comes to housing the construction of them.

As the governor of the Reserve Bank, Philip Lowe, told the central bank symposium at Jackson Hole in the United States last month “monetary policy can’t drive long-term growth, but the other policy levers can” and “relying on monetary policy risks further increases in asset prices in a slowing economy, which is an uncomfortable combination”.

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If all we see as a result of interest rate cuts is greater competition for established homes then all we will see is increased house prices. That might in time lead to more economic activity as people borrow against their increased home value but it’s not really what the RBA is after.

As we saw last week with the June GDP figures, residential building construction is dragging down economic growth across all states and territories except the ACT and Tasmania:

And the latest building approval figures suggest no real improvement is on the way:

New South Wales and Victoria especially continue to see a decline in the number of private sector building approvals.

And it is here that we see some evidence that we should be worrying that the interest rate cuts are just fuelling house prices and not economic activity.

In July, while the number of home loans for new and established dwellings took off, the numbers for construction fell – as they have for 21 out of the past 23 months:

Clearly, it takes longer to decide on the construction of a house than buying one already established, and so we should not be surprised that there is such a lag, but generally there is a nice correlation between the growth of loans for construction of new homes and those for the purchase of established houses.

So while we perhaps should wait a bit before getting too worried, you can understand why the governor of the Reserve Bank might be hoping the government would lend a hand with infrastructure spending.

Low interest rates might get people borrowing to build a new home, but the big risk is that with rates at already record lows, further cuts will mostly affect house prices and not economic activity.

At some point the government needs to realise the RBA cannot do it all.

• Greg Jericho writes on economics for Guardian Australia