The Reserve Bank cut interest rates to 2% on Tuesday hoping to stimulate business investment and household spending. The RBA’s decision was welcomed by Treasurer Joe Hockey, but there are concerns the record-low rate will further inflate the already heated housing markets in Sydney and Melbourne.

The Economist magazine recently evaluated Australia’s housing market to be overvalued by more than 25% (along with Britain and Canada). Even accounting for our higher incomes, Australia’s house prices are now among the highest in the world.

While there is sympathy for the difficulties faced by would-be first-time homebuyers, a strong housing market is often associated with jobs and revenue for States and Territories (the economies of both New South Wales and Victoria have strengthened significantly partly due to the housing sector). Rising house prices are also good news for many Australians – more than 60% are owner-occupiers - and successive governments have implemented and maintained policies that promote a buoyant housing sector.

Policies such as negative gearing, the first home owners grant, and capital gains tax concessions have helped many middle and high income earners buy property, but how are these policies impacting low income earners?

Dallas Rogers speaks with Keith Jacobs about the politics of housing in Australia, and how to address the inequalities within the current system.

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Music: Free Music Archive/Blue Dot Sessions: Stingray (CC BY-NC)

Additional audio: A Home of their Own, National Sound and Film Archive

Dallas Rogers does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.