Despite the banks promising to be more stringent in assessing the financials of borrowers, only 17 per cent of applicants said it was harder to get a loan. Credit:Glenn Hunt The market has been fuelled by an easing cycle begun late in 2011 that brought the cash rate to 1.5 per cent as the central bank sought to counter the drag from plunging mining investment. But a jump in exports and a residential construction boom has helped lift annual economic growth to 3.3 per cent in the second quarter and unemployment fall to 5.6 per cent in August. The main challenge remains weak inflation, and new central bank governor Philip Lowe told lawmakers last month that while consumer-price growth could be returned to its 2 to 3 per cent target faster via looser policy, he was reluctant to do so because it risked igniting a new round of borrowing among debt-laden households. Dr Lowe made clear he and his central bank colleagues weren't "inflation nutters". Low rates Mr Morrison said in the interview that monetary policy worldwide had basically "exhausted its effectiveness", while acknowledging that some attending the Group of 20 and IMF meetings still believed it had a role to play - particularly Japan and the European Union.

"From our perspective, the old pushing-against-the-string analogy is very relevant," Mr Morrison said of monetary policy in Australia. Treasurer Scott Morrison says achieving home ownership is proving more and more difficult. "It's up to Phil what happens next, but I don't detect any great sort of enthusiasm for any further easing there." Money markets are reaching a similar conclusion, pricing in a less than 50 per cent chance the Reserve Bank of Australia will cut its cash rate from 1.5 per cent through 2017. Mr Morrison, who took over as treasurer about a year ago during a national leadership change, allied himself closely with former RBA governor Glenn Stevens as he sought to get up to speed on the economy. Dr Lowe replaced Mr Stevens last month and in his renewed monetary policy agreement with the government introduced a more direct link with financial stability, with the housing market likely a key area.

Mr Morrison spoke after meetings that included US Federal Reserve Chair Janet Yellen and S&P Global Ratings, which in July cut the outlook on Australia's AAA credit score to negative from stable. Quizzed on the government's decision to focus on reining in a budget deficit and bringing debt under control rather than using fiscal stimulus, Mr Morrison made the case for spending restraint. "Our debt-to-GDP, which will peak just over 30 per cent, is low by global standards," he said. "But given our current-account deficit position, I think we have far less wriggle room when it comes to government debt in Australia." Prime Minister Malcolm Turnbull is operating with a razor-thin majority in parliament after a July election that saw the government's tally of 90 seats in the 150-member lower house cut to just 76 - a majority of one. Boosting productivity Mr Stevens and Dr Lowe have made the case for utilising low global rates to borrow cheaply to fund infrastructure and boost productivity in the economy. Mr Morrison said while Australia was still increasing borrowing to cover government spending on obligations such as health, education and welfare, it wasn't in a position to splurge on capital.

"The priority is to get ourselves in a position where you're not increasing your debt to cover off recurrent expenditure," Mr Morrison said. "If you are going to take those decisions you're doing it knowingly to boost productive capacity in the economy. Now the other condition on that is projects. There's got to be the projects. This has been a source of frustration for some years." Australia's electorate is sceptical of government-funded infrastructure that is often either politically motivated or not properly costed, leading to blowouts in the final price. "What we want to see in our economy now is an increase in private investment," Mr Morrison said. "We have to be very conscious of arresting our debt at the moment." Asked about his meeting with the S&P and their response to the passing of government savings measures worth $6.3 billion, Mr Morrison said: "They had noticed."

'Workable parliament' "I was able, not just on that issue but a number of other issues that we've been able to land since then, been able to demonstrate that this is a more workable parliament," Mr Morrison said. "I mean I'm not going to get overly excited at this point, it's still early days. But if the expectation was that nothing would pass, that's not true. We have been able to get things to pass." As to the housing market, Mr Morrison maintained the key driver had been lack of supply at a time of low rates. Surging prices have seen developers throwing up apartment blocs across major cities, leading to the reverse risk of a glut once they're completed. One concern was that foreign investors who are buying off the plan wouldn't complete their transactions.

The Treasurer said these have diminished "over the last three or four months" as capital flows from China held up. He acknowledged the reason for investors' focus on the housing market given 60 per cent of Australian banks' loan books were on the property market. "It's obviously pretty critical" to the economy. Loading But "it has been a housing market whose values have been underpinned by quite sound fundamental economic principles of supply and demand," Mr Morrison said.

Bloomberg