These trends also added to aggregate demand in the economy, via additional construction and renovation spending, and the generally expansionary impact of rising asset values on broader household spending. Whereas dwelling investment averaged around 5 per cent of GDP through the 1970s and 80s, it reached a peak of nearly 7 per cent of GDP in 2003/04.
Households also expanded their consumption faster than their income. For a time, these trends were helpful in periods when adverse shocks from abroad were having their impact. Over the past two or three years, these effects gently faded.