Reserve Bank Governor Glenn Stevens has called for the government to consider going further into deficit to fund new infrastructure construction as he contradicted Joe Hockey on the housing affordability and economic debate, describing runaway house prices as "crazy".

One month after its second budget (sold as the best budget ever for small business), soaring house prices, stubbornly flat wages growth, high unemployment and declining consumer confidence are adding to pressure for the government to do more to bolster the economy by directly financing roads, rail, and port construction, even if it makes the deficit worse.

Mr Stevens, who on Wednesday branded high prices being paid in the Sydney housing market in particular as "crazy", has revealed the threats to national growth are now so numerous that the central bank remains "open to the possibility of further [monetary] policy easing, if that is on balance, beneficial for sustainable growth".

But he made clear the Reserve, which has already slashed the cash rate to a record low 2 per cent, is running out of leverage itself and would prefer to see stimulus spending by the government, saying there is nothing wrong with borrowing to build public assets.

He described it as "very important" that policies other than interest rates "coalesce around a narrative for growth".

"As things stand, the economy could do with some more demand growth over the next couple of years," he told a Brisbane Economic Society lunch.

That could see Canberra going further into debt in the short term, with the ordinarily conservative governor noting pointedly, "it is perfectly sensible for some public debt to be used to fund infrastructure that will earn a return – that is not the same as borrowing to pay pensions or public servants".

However, in a nod to the bitterly polarised political debate about debt and deficit in Australia in recent years, he called on the political community to agree on a common "story" in favour of infrastructure spending to help build confidence and to "unleash large potential benefits that at present are not available because of congestion in our transportation networks".

"Infrastructure spending has a role to play in sustaining growth and also in generating confidence ... it would be confidence-enhancing if there was an agreed story about a long-term pipeline of infrastructure projects, surrounded by appropriate governance on project selection, risk-sharing between public and private sectors at varying stages of production and ownership, and appropriate pricing for use of the finished product.

"The impediments to this outcome are not financial."

The call for debt-financed public expenditure on economic upgrades came as Mr Abbott was forced to defend his embattled Treasurer, Joe Hockey, who had played down the harmful effects of overheating Sydney and Melbourne property markets, arguing they are functioning properly because houses were being bought and sold, and that first home buyers were only locked out if they did not have well paid and secure jobs.

While Liberals mostly rallied around Mr Hockey, arguing his observations were simply statements of fact, voters on social media sites and talkback radio responded less favourably, with many claiming to be insulted by the suggestion of moving into higher paid jobs.

Adding to Mr Hockey's woes, the monthly Westpac-Melbourne Institute consumer confidence index fell by a sizeable 6.9 per cent in June, to be once again below the 100-point mark where optimists and pessimists are equally numbered.

At 95.3 per cent, the index suggests consumers were relieved rather than impressed when Mr Hockey's second budget avoided the harsh cuts of his first budget in 2014, but that the 2015 blueprint has done nothing to improve sentiment and get people spending again.

Speaking in western Sydney, where house prices have risen steeply in recent years, Mr Abbott refused to be drawn on whether Mr Hockey has been insensitive to suggest that people needed adequate incomes to buy into the market.

Asked if teachers and nurses were being encouraged to change jobs or accept life as renters, Mr Abbott went for empathy, saying he had "felt a bit of mortgage stress" himself over the years.

"Even as a cabinet minister sometimes it's hard to pay a Sydney mortgage and I know that over the years I've earned a lot more than the average person," he said.

"So, the Abbott family certainly understands what it's like to have a mortgage. We still have a mortgage. We still have a mortgage – like so many Australians. I've got three daughters, all of whom at some point soon either are getting into the housing market or are looking to get into the housing market," he said.

"This is a treasurer who is striving every day to do the right thing by the people of Australia."

However, one of Mr Hockey's own colleagues conceded that the Treasurer's comments were at the very least "unwise" and that Mr Hockey had "done his dash" with voters.

The MP said expectations of Mr Hockey were now low and said he would probably be replaced at or before the next election to improve the government's key economic messaging.

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