PHOTO: The RBA’s Guy Debelle says any inequality created by the soaring housing market should be tackled with policy levers other than interest rates. Photograph: Dan Himbrechts/AAP

The Reserve Bank of Australia will not raise interest rates to ease soaring house prices because tightening monetary policy could cost jobs, the deputy governor has said.

In a speech on monetary policy during the Covid crisis, Guy Debelle noted house price growth was encouraging spending. He argued to the extent it was a “distributional” problem – which can affect inequality – it should be tackled with other policy levers.

The RBA has dropped the official cash rate to a historic low of 0.1% and engaged in a program of bond buying worth $200bn in total, after a $100bn extension in February, in response to the 2020 pandemic recession.

Expansionary monetary and fiscal policy have resulted in better-than-expected economic growth and jobs recovery.

Australian capital city house prices have surged by double digits, including an 8.5% quarterly increase in Sydney where the median house price is now an eye-watering $1.31m.