When the price of machinery and equipment is cyclically low relative to the price of goods and services produced using those investment goods, investment tends to be high. And indeed this is what we have seen over the past 10 years in Australia.
As with the price of manufactured consumer goods, there is a clear downward trend over time in the relative price of machinery and equipment (Graph 4). This is largely, but not solely, driven by technology improvements lowering the price of computing power.