Another rate cut later this year could certainly help Australia's sagging economy, but what are the consequences for Sydney's property boom? 

Dealing with Sydney's hot property market is the greatest challenge currently facing the Reserve Bank of Australia, writes property advisor Richard Wakelin in today's The Australian Financial Review. "If Sydney could be wished away, the RBA would have little compunction in cutting the cash rate aggressively to support a sagging Australian economy. But what we see at the moment is an RBA that is still cutting, while showing some trepidation about what will happen to the Sydney property boom," writes Wakelin.

While other policy measures could be implemented to specifically target Sydney—such as the state government increasing stamp duty or Sydney councils reducing the red tape around planning and redevelopment of vacant land—Wakelin believes the Sydney property boom might peter out in a benign way without the RBA keeping interest rates artificially high for the rest of Australia.

"To some extent, we may well be seeing a return to normal circumstances where Sydney property enjoys a 20 per cent premium over its southern counterpart due to higher incomes, a larger population and a greater scarcity of land," writes Wakelin.

Meanwhile, a research report commissioned by the Property Council of Australia and based partly on data from the Australian Bureau of Statistics reveals that Sydney is facing a housing crisis. There is a shortfall of 190,000 homes needed to house Sydney's growing population over the next 10 years, reports The Daily Telegraph, and Sydney councils have failed to approve new dwellings fast enough to meet this demand. “Sydney councils need to turbocharge housing supply because right now homebuyers and our economy are paying the price,” NSW Property Council executive director Glenn Byres said. “Home building is critical to the state’s economy — and supports tens of thousands of tradespeople and other workers. If we fail to keep pace with demand, we drive up prices and make housing less affordable for the next generation of homebuyers.”