During the property boom of the early- and mid-2010s, the RBA was worried about a price bubble and kept rates high in order to cool the market.

This time, the RBA says it is determined to use monetary policy to push the economy to full employment. It will not raise rates until inflation rises into the range of 2 to 3 per cent a year, which it sees as normal. Although the RBA upgraded its growth and inflation forecasts on Friday, it is still not expecting inflation safely back in its target range until 2024.

RBA deputy governor Guy Debelle in a speech on Thursday said he was aware that this policy would drive up property prices, handing an unearned windfall to people who already own property and frustrating first home buyers. But he said the RBA was not going to do anything about prices this time because its focus was employment and wages. “That is certainly an issue that needs to be considered and there are a number of tools that can be used to address the issue. But I do not think that monetary policy is one of the tools,” Dr Debelle said.

If prices keep growing at the current rate, Dr Debelle is right that governments and regulators should look at what they can do to cool the housing market. The Australian Prudential Regulation Authority can start by toughening bank lending standards, especially for speculative investors in overheated sectors of the market. Banks could be forced to demand larger deposits and take a more conservative view of borrowers’ ability to repay.

The federal government should also look at recalibrating property taxes on negative gearing and capital gains which currently unduly favour investment in housing.

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The government should also reconsider its plan to scrap the legal obligation on the banks to lend responsibly. Governments should resist populist pressure to boost subsidies such as the First Home Deposit Scheme, which only heats up the market more. Building more houses is the best way to keep a lid on prices.

Home buyers should be aware of the RBA’s shift in policy because while interest rates are low, they will not stay low forever.

Once inflation starts to rise above 2 to 3 per cent, the RBA will return to its old ways and mortgage rates will jump. On current forecasts, rates won’t rise for two years but if the recovery proceeds faster than expected it could be sooner.

Investing in housing in Australia has proved to be a safe bet but not at any price and not if you are looking for a quick turnover.