Experience tends to confirm people’s initial heightened sense of optimism. Expectations of future incomes are revised up and people make plans accordingly. In time, almost inevitably, people tend to be lulled into complacency about downside risks, and become over-optimistic about how long the good times will last.
Up to 2013, the gearing ratio of the major miners had increased significantly, and for some companies it was at quite high levels (Graph 12).