He estimated prices would have to fall by more than a third to reach “fair value”.
Mr Chancellor identified first home buyers, sensitive to interest rate rises, as a key area of concern moving forward.
“Given the great growth in private sector credit and the vulnerability of the housing market…Australia is not out of the woods. It hasn’t even entered the woods,” Mr Chancellor is reported as saying in The Australian.
He said Australia’s banks acted as a cartel during the economic downturn, adding that luck, rather than skill, allowed the Australian economy to fare better than other countries.
Banks were able to avoid much of the reckless lending that occurred in the US, he said.