12 / 16  BIS Central Banker's Speeches  Conclusion The pattern of adjustment of the Australian economy to the decline in the terms of trade and mining investment is generally consistent with what we had anticipated. However, the decline in the terms of trade was larger than expected.
In an effort to lower the cost of production, firms tend, where possible, to substitute capital and labor for energy consumption. In the 1970s and 1980s, such substitution greatly reduced the amount of energy consumed in the business sector per unit of output. I'd expect to see a similar response to the latest price run-up in the years ahead.