SYDNEY (AFP) - Foreign investment in Australia's housing market will be examined by a national parliamentary committee, its chair said on Monday, following a study that said Chinese investors are squeezing out local buyers.

Ms Kelly O'Dwyer said the House Standing Committee on Economics inquiry into affordable housing would probe the foreign investment framework to see whether it helps increase housing stock, and whether it is driving up prices.

"We know that the great Australian dream is to own your own home and we know that that's pretty difficult - even with two incomes and lots of years of savings and a large mortgage," Ms O'Dwyer told ABC radio.

"So we want to make sure that we're not making it even more difficult."

Chinese investment is a sensitive issue in Australia, where rural politicians have argued against selling valuable farm and mineral land to foreigners, and there are indications of an influx in Chinese investors in housing.

Investment bank Credit Suisse this month estimated that Chinese investors could pour A$40 billion (S$45.7 billion) into Australia's residential property over the next seven years and this could push up prices in what is already one of the world's most expensive housing markets.

In a report, Credit Suisse said Chinese buyers - who are restricted to buying only new homes - purchased 12 percent of new housing across Australia per year.

But they concentrated their buying in Sydney and Melbourne, acquiring 18 percent and 14 percent of new supply respectively, meaning they were a much more powerful force in those cities where home prices are climbing.

"The Reserve (central) Bank governor made some comments in the recent parliamentary oversight hearing of the Economics Committee, where he said all foreign investment does have an effect on prices," Ms O'Dwyer said.

"We want to know though whether or not the current laws and the current framework is being properly adhered to and whether it is a truly distorting impact."