The outgoing Reserve Bank of Australia governor has increased confidence in the central bank’s plan to beat inflation, despite a range of longer-term challenges bubbling on the economic horizon.

During one of his final public appearances, Philip Lowe appeared to be more confident about navigating a “narrow path” between tackling high inflation and keeping as many people as possible in their jobs.

Still, he didn’t rule out more monetary policy tightening by the RBA if the situation called for it.

With his term due to end in September, Dr Lowe once again stressed the importance of kickstarting productivity growth.

“It’s the number one medium-term economic issue,” he said while giving evidence to a parliamentary committee in Canberra on Friday.

An absence of growth in labour productivity in the past three years was a problem, he added.

“If that were to continue, it means lower growth in the economy, it means small gains in asset values, it means real wage increases are very difficult, it means a smaller pie for government to provide the services that the community wants.”

Dr Lowe offered a couple of ideas to kickstart productivity, including better education and schooling, embracing the digital economy, bolstering competition policy and reforming zoning regulations.

More valuable suggestions could be found in the Productivity Commission’s five-yearly review, released earlier in the year, which included 71 recommendations, he added.

“In my view, it should be an issue that dominates the economic discussion.”

On housing, another major issue, Dr Lowe warned against focusing on short-term solutions to affordability issues, such as rent freezes or controls and first home buyer grant handouts.

“Generally, giving people more money or capping prices doesn’t help with the balance of supply and demand in the market,” Dr Lowe said.

The outgoing governor will be replaced by his deputy, Michelle Bullock, on September 18.

— AAP