Household debt and real housing prices Per cent of disposable income and index, 2000 Q1 = 100 200  200  Household debt ratio Real property price index  180  180  160  160  140  140  120  120  100  100  80  80  60  60 80  85  90  95  00  05  10  Note. Debts refer to total debts. Real housing prices are nominal property price index deflated using the CPIF. Sources: Statistics Sweden and the Riksbank  12  BIS central bankers’ speeches  Figure 8. Monetary policy deliberations • •  Inflation Resource utilisation  Target attainment during the forecast period  Monetary policy deliberations  Repo-rate path Probability of the scenario Debt Consequences of the scenario: • inflation • resource utilisation  Expected target attainment beyond the forecast horizon  Source: The Riksbank  Figure 9. Household debt ratio Per cent of disposable income  Note. Households’ total debts as a share of their disposable incomes, totalled over the past 4 quarters. Sources: Statistics Sweden and the Riksbank  BIS central bankers’ speeches  13  Figure 10. CPIF inflation  Note. Annual percentage change. The CPIF is the CPI with a fixed mortgage rate. Sources: Statistics Sweden and the Riksbank  Figure 11. Repo rate  Note. Repo rate, per cent. Forecast refers to quarterly mean values, outcome refers to daily data. Source: The Riksbank  14  BIS central bankers’ speeches  Figure 12.
In recent years, much of the (meagre) productivity growth seen in the euro area has come through labour shedding rather than from strong value added growth. And if those displaced don’t have the right skills to find another job, structural unemployment is likely to increase further, or they will be forced to consider low productivity sectors, and then aggregate productivity growth will stagnate once more. Neither scenario is desirable or sustainable. So our aim must be to achieve high productivity growth at full employment. But how can that be achieved? Essentially, there are two channels towards higher productivity growth, and to combine productivity growth with full employment we need to employ both. The first is within-firm productivity growth, which is about investing in or adopting new technology. There’s quite some debate, led by scholars like Robert Gordon, as to whether the great waves of technological innovation are now behind us. 11 But whether or not that’s the case, I don’t see it as a barrier to productivity growth in the euro area. In fact, we still have a long way to go to capitalise on the last wave of innovation – the ICT revolution – which many firms have not yet incorporated into their business models. Indeed, a large part of the difference in productivity performance between the US and the euro area can be attributed to the fact that US firms have invested more in ICT capital, and crucially, in the human and organisational capital necessary to full reap the benefits of it.