Secondly, there is no strong evidence to suggest that aggregate demand growth is less responsive to interest rate adjustments. 28 The stimulus from low interest rates appears to be supporting house prices and construction sector activity via residential investment in line with previous cycles (even after accounting for the Canterbury earthquake reconstruction).
29 Construction sector activity continues to have a strong influence on the output gap. Although consumption growth per capita has been weaker than projected since 2013, this is partly explained by exaggerated expectations rooted in the housing cycle of the early 2000s.