The Reserve Bank says property price rises can exacerbate inequality, and it's "certainly an issue" that needs to be considered at the moment.

But monetary policy is not the appropriate tool to address the problem, because it is designed to encourage employment and inflation, it said.

It means the RBA will not be tempted to lift interest rates to try to cool Australia's runaway property prices, regardless of community concerns about unaffordable housing.

It also means Australians should be looking to the Australian Prudential Regulation Authority (APRA), or federal or state governments, to stop property prices rising even further out of the reach of households this year.

The RBA's clarification comes less than six weeks after APRA reminded Australians that it didn't have a mandate to target house prices or housing affordability either, because its job was to focus on the stability of the financial system.

"There does not seem cause for immediate alarm," APRA chairman Wayne Byres said at the time.

"Nor, though, for complacency. We are watching risk-taking by the banking sector closely, along with our colleagues on the Council of Financial Regulators."

'Distributional consequences' of rising house prices

Guy Debelle, the RBA deputy governor, delivered a speech to the University of Western Australia's business school on Thursday.

Dr Debelle said the emergency stimulus measures the RBA had been using to support economic activity through the COVID recession had clearly supported employment and economic growth.

However, he acknowledged that rising house prices can have "distributional consequences," meaning they can affect the distribution of wealth in a negative way.

He said the RBA recognised that rising housing prices heightened concerns in the community too.

"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," he said.

"Monetary policy is focused on supporting the economic recovery and achieving its goals in terms of employment and inflation.

"It is important to remember that while housing prices may not rise as fast without the monetary stimulus, unemployment would definitely be materially higher without the monetary stimulus.

"Unemployment clearly has large and persistent consequences."

Economy performing much better than expected, but wages growth still anaemic

Dr Debelle said the economy was in a far better position than the RBA expected it to be at this stage of the economic recovery.

He said economic growth had been higher than expected, and the economy was now back to its pre-pandemic level of gross domestic product (GDP).

He said employment was above its pre-pandemic level, the unemployment rate had declined rapidly to 5.6 per cent, which was only half a percentage point higher than before the pandemic, and measures of underemployment had declined by similar magnitudes.

He said participation in the labour market had "remarkably" increased to a record high.

But the outcomes for wages and inflation were nowhere near as good.

"While the Australian economy has experienced better employment outcomes than most other countries, wages growth in Australia has been noticeably weaker than in many comparable economies, most notably the United States," he said.

He said inflation in Australia, in the year to March, was just over 1 per cent.

It could spike to above 3 per cent in the June quarter, he said, because of higher oil prices and the unwinding of subsidised child care, but it would probably fall after that, to be back below 2 per cent.

Determined to reach "full employment"

For that reason, he said monetary policy would remain extremely loose for a number of years because the RBA was determined to reach "full employment."

"The RBA Board is prepared to undertake further bond purchases to assist with progress towards the goals of full employment and inflation," he said.

"The Board places a high priority on a return to full employment."

However, there is a debate among economists and policymakers about the definition of full employment.

In recent months, Treasury, the RBA, and federal Treasurer Josh Frydenberg have acknowledged that the unemployment rate could be much lower than they thought before inflation growth started accelerating.

They've said Australia's economy could now handle an unemployment rate "with a four in front of it," and that's probably been the case for years.

But some highly regarded orthodox economists have been wondering aloud why authorities don't just drive unemployment down as hard as possible, to find where genuine full employment really is.

Other economists say the RBA's definition of full employment needs a complete overhaul.

Dr Debelle said the RBA did not think the economy would reach full employment (under its definition) until 2024 at least.

"The Board will not increase the cash rate until actual inflation is sustainably within the target band of 2 to 3 per cent," he said.

"For that to occur, we will need to see further significant gains in employment and a lower unemployment rate.

"We will need a tighter labour market to lead to higher wage rises.

"In the Board's central scenario for the Australian economy, it does not expect these conditions to be met until 2024 at the earliest.

"Significant monetary support will be required for quite some time to come."

RBA's stimulus could be reined in earlier than anticipated

However, Dr Debelle said the RBA was also prepared to withdraw stimulatory measures earlier than planned if the economy continued to surprise in a positive way.

He said the bank had provided a possible timeframe, alongside its description of the state of the economy that would be required before the RBA considered a rise in the cash rate.

Under its central scenario, those conditions were unlikely to be met until 2024 at the earliest, he said.

That timeframe complemented the three-year government bond yield target and helped to underpin the low level of interest rates across the economy.

However, that could all change.

"I would highlight that it is the state of the economy that is the key determinant of policy settings, not the calendar," he said.