The WA cycle shows the importance of incomes and population dynamics in driving the construction and price cycles. The resource investment boom saw a marked change in the population dynamics in WA. Population growth picked up from 1.1 per cent in 2002 to 3½ per cent at its peak in 2008. Incomes also grew very strongly with the resources boom.
The construction response again followed with a lag. But the strong inward migration turned to outward migration once the resources cycle turned and incomes declined too. Housing construction continued past the turn in the cycle, contributing to the price dynamics that I will come to shortly.