Treasurer Josh Frydenberg has highlighted the "social responsibility" of banks to lend money as he backed a plan by the financial regulator that will lift the maximum amount of money a home buyer can borrow.

Fresh from a meeting he and Prime Minister Scott Morrison had with top officials from the Reserve Bank and the Australian Prudential Regulation Authority (APRA), Mr Frydenberg on Wednesday also acknowledged the "headwinds" facing the economy, including from the housing slump, but argued his planned tax cuts could help boost growth.

Treasurer Josh Frydenberg and Prime Minister Scott Morrison as they left the Reserve Bank following their meeting with governor Philip Lowe on Wednesday. Credit:Peter Rae

Speaking at the Stockbrokers and Financial Advisers Association conference in Sydney, Mr Frydenberg welcomed APRA's plan, announced on Tuesday, to scrap a rule that has meant banks assess how new customers would cope if interest rates rose to 7.25 per cent, which is much higher than current rates.

“That’s a positive development. I think that will continue to spur lending,” Mr Frydenberg said.