Reserve keeps demons at bay for CBA chief

Commonwealth Bank chief executive Ian Narev does not lie awake at night worrying about how the property market might respond to record-low interest rates, despite persistent questions about house prices from foreign investors.

Commonwealth Bank chief executive Ian Narev does not lie awake at night worrying about how the property market might respond to record-low interest rates, despite persistent questions about house prices from foreign investors.

The chief of the country's biggest bank said on Monday he thought the economy was suffering from low confidence, and it was important the election produced a clear winner.

He also believed there would probably be one more quarter of a percentage point cut in the cash rate, after the Reserve lowered the benchmark rate to a 53-year low of 2.5 per cent last week.

While some experts are debating the potential for cheap debt to sow the seeds of a future housing bubble, Mr Narev said he had total confidence in RBA governor Glenn Stevens and the board to make this judgment.

"I am absolutely confident that all direct and indirect consequences for the property market that may flow from a change in interest rates are absolutely thought through by the governor and his board," Mr Narev said at a conference in Sydney.

"I do not lose a moment's sleep thinking about that. They think very carefully about a range of issues, they are absolutely aware of what effects different interest rate settings might have on the economy and I've got a lot of confidence that they ... have a good perspective about that."

Mr Narev said foreign investors always wanted to talk about Australian house prices, but "stress tests" had found the bank would survive a severe housing downturn with price falls of up to 40 per cent.

Banks are increasingly competing to sell home loans, with National Australia Bank offering $1000 cash payments to customers who refinance their home loan with the bank. Aussie Home Loans has slashed rates on two-year fixed mortgages to 4.64 per cent, a move it said was facilitated by access to funding from CBA, which owns 80 per cent of the company.

After the sharp fall in interest rates, some analysts and industry insiders say there is a debate to be had on the risks of a housing bubble taking shape.

Speaking on the same panel as Mr Narev, real estate agent John McGrath said the recent price growth in some areas was probably not sustainable over the long term.

Money markets have priced in one more official rate cut of a quarter of a percentage point, and Mr Narev said he thought this was "about right, but these things can change on a dime".

"We love the fact that we're so dependent on Australia as an economy ... but in the short term there are some confidence challenges, and we've all got to be aware of those," he said.