Researve Bank governor Glenn Stevens has warned Australia is at risk of a property market bubble, with prices inflated by the low cost of finance and a reduced supply of new housing.

In a speech in Sydney today, Mr Stevens said at a time of rising unemployment it would be “disturbing” for policy makers if there was not more supply coming on to the market which would ensure prices remained under control.

The central bank boss also warned that for global policy makers “challenges abound”, especially the threat of inflation beginning to rise at a time when real economic activity was starting to gain traction.

The Australian