Since 2016, aggregate household disposable income has grown at an average rate of around 2¾ per cent per year. This is down from an average of 6 per cent over the preceding decade. It is plausible that households have responded to this extended period of weaker income growth by progressively downgrading their spending plans.
The issue of skill intensity is also very relevant for potential growth. While raising labour participation is crucial, demographic prospects imply that it will provide a diminishing contribution to future potential. Lifting trend growth will have to come mainly through raising labour productivity.