As Crikey has recently reported, the Reserve Bank’s growing concerns — and increasingly blunt language — about the Sydney and Melbourne property markets are beginning to loom larger on the government’s political radar.

For two years now, the RBA has been looking to engineer a transition from the mining investment boom to a more traditional pattern of economic growth for Australia, based more heavily on housing construction, via low interest rates. It has done so in a period when federal and state governments have been reducing public demand. And while much of the stimulus afforded by low interest rates has flowed into housing construction, it has also flowed into property investment, which has restarted a period of high growth in prices in markets where demand significantly outstrips supply: Sydney and Melbourne.

The reasons for this imbalance lie in the hands of politicians of both sides, not the RBA: it is federal politicians who have left intact policies like negative gearing that have driven housing investment. It is state politicians, particularly in NSW, who have failed to properly match land supply and infrastructure with demand. It is local government politicians who have allowed NIMBYism and hyperlocal politics to turn the development approval process into an ordeal for developers.

The RBA now appears to be dealing with the growing macroeconomic threat of a fall in property prices not just with its main tool, interest rates, but with macro prudential tools, though they are more properly the purview of the Australian Prudential Regulatory Authority. Such tools, such as tougher lending rules, will serve to drive first home buyers out of the property market before they drive out investors.

Before interrogating the RBA about its concerns about unsustainable property price growth, politicians should be asking hard questions of themselves about why, collectively, they have created the conditions with an undersupply of housing and an oversupply of investment looking for real estate.