Prime Minister John Howard says a fall in house prices was a natural correction to an overheated market.
House prices have fallen in Sydney with higher interest rates but risen dramatically in Perth as the West Australian economy powers along on a resources boom.
"The housing market in sections of the country did get overheated and there did need to be some correction," Mr Howard told CNBC television.
"I think that's occurred without big damage being done to borrowers and big damage being done to the industry and that's beginning to come back."
Mr Howard refused to comment on speculation the Reserve Bank will lift interest rates next month.
"As for speculation about interest rates, I won't engage in that. That's a matter for the central bank [Reserve Bank of Australia] to determine," he said.
Source: AAP
