ANZ bank's Australian boss, Phil Chronican, says tougher credit rules for banks may be a "sensible" option if house price growth becomes unsustainable, though the property market is currently nowhere near that point.
Amid a debate over the rising housing market, Mr Chronican acknowledged property prices were "undoubtedly high relative to many other markets" and expensive compared with other assets.
While he believed concern of a housing bubble was "overstated", he said that if prices surged for several years there may be a case for "macroprudential" policies.
These are measures designed to decrease the level of risk across the financial system without needing to raise interest rates.
New Zealand, for instance, will next month cap the share of new home loans banks can issue to buyers who have a deposit of less than 20 per cent of the property's value.
"I do understand that probably only as a temporary measure, there might be circumstances under which such a thing might be a sensible thing to do," Mr Chronican said at an American Chamber of Commerce in Australia function in Sydney.
"Interest rates, at the end of the day, are a very blunt instrument. They affect all sectors of the economy and all regions of the economy evenly, even though the issues that you're trying to manage might be quite isolated."
Economists are also debating whether Australia may need to consider macroprudential policies, amid concerns record low interest rates could stoke a debt-fuelled housing boom.
The Reserve Bank has not signalled it is considering these moves, and nor has the Australian Prudential Regulation Authority.
Mr Chronican said he did not believe regulators were "anywhere near" needing to impose tougher lending rules at the moment.
With house prices rising at their quickest pace in three years, Mr Chronican acknowledged the strong long-term growth that has prompted some overseas commentators to sound the alarm.
The price of a home had increased 5.5 times over the past 27 years, from $85,000 to more than $500,000, he said, making homes appear expensive compared with income and other assets.
But he argued the rises were justified by a failure to build enough homes to keep up with population growth, and dismissed talk of a property bubble as "overstated".
ANZ, the country's fourth largest mortgage lender, estimates there is a shortage of 270,000 homes, a figure it expects will blow out to 370,000 by 2015, putting more pressure on prices.
At the same time, he said Australians should not assume the country was immune from housing corrections overseas, urging caution to people using negative gearing or putting large amounts of superannuation assets into property.
"It is not impossible to imagine a major economic downturn, a reversal in our net migration data and a significant lift in unemployment having a major impact at some future date," he said. "What is also clear, though, is that we do not face such a prospect in the forseeable future."
The Reserve Bank this week cautioned home buyers not to expect a repeat of the bumper house price growth of the 1990s and early 2000s, saying future rises will probably be more gradual.
ANZ expects house price growth to stabilise at 5 per cent this financial year, which the Reserve Bank will "tolerate" as it tries to kick-start non-mining parts of the economy.