But the adjustment in Australia has been benign compared with the adjustments in household finances and housing markets elsewhere in the world, and it has put household spending and financing on a more sustainable path. This will ultimately benefit the health of the economy. In the case of business investment, there is a clear dichotomy between the resource and non-resource sectors of the economy.
As long as the increase relies more on an increase in asset prices—the “wealth effect”—and as long as this turns out to be temporary, the turnaround in prices may lead to a turnaround in private consumption as well, and therefore in activity.