Worried that $500,000 is too much to pay for a Melbourne house? The Reserve Bank isn't worried and it expects prices to climb higher still.

In a speech that amounted to a defence of Australia's historically high house prices, Reserve Bank deputy governor Ric Battellino told a Melbourne housing conference yesterday to expect worse and to recognise that buyers were getting value for money.

Prices would climb further because the global economy was growing again and because Australia had entered ''a new upswing'' that would extend its record 18 years of continuous economic expansion.

House prices would be boosted by increased population growth and immigration, solid increases in household incomes and ''substantial competition'' for construction industry workers from the mining sector.

Australians had been spending more of their income on housing than ever before but had been getting bigger and better houses as a result.