Former Reserve Bank of Australia (RBA) governor Ian Macfarlane believes Australia only has an affordability problem, which isn’t necessarily a housing bubble.

He said as former RBA governor and now director of ANZ Bank, he still had to deal with questions about the feared housing bubble.

“I still have to answer phone calls from overseas investors thinking there is a housing bubble in Australia which is about to burst. I think we definitely have an affordability problem but I don’t think we have a bubble”, he told The Australian.

Macfarlane noted the country’s one big difference among was that Australia did not have excessive residential construction — unlike countries such as Spain, Ireland and the US, where there was a “massive oversupply”.

Meanwhile, Macfarlane also called for major revamps in the tax system, saying that income tax rates in Australia needed to be reduced and the tax base broadened.

Macfarlane is also a director of Woolworths and an adviser to three international hedge funds. He retired as RBA governor in September 2006.