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One of these other forms of spending is home construction, and the modest rise that is underway here is a welcome development. Some lift in consumption growth is expected, although a return to consumption growth faster than income growth for a long period is unlikely. It could also be unwelcome given the relatively high degrees of existing home debt.

So this means that a pick-up in non-mining investment is an important area of the tale in the return of the Australian economy to trend development. Indeed, our expectation is that this will take place, with development in non-mining investment forecasted to get to at least high single-digit rates within the next couple of years. This is, of course, a forecast and there is certainly the usual wide range of uncertainties.

These include doubt as to the appropriate steady-state capital-output ratio for the economy and the associated investment proportion. These important structural variables are inspired by a complete range of considerations, including the rate of total factor efficiency growth, population growth, the rate of depreciation, and the industry framework. But from a far more cyclical perspective, there are a variety of factors that support the view for a steady pick-up in non-mining investment.

The three factors I wish to list – and they are clearly interrelated – are some depreciation of the exchange rate, a noticable difference in business confidence, and the very low level of interest rates. As the Australian dollar has appreciated over the past month or two, on the trade-weighted basis, in Apr. this season it is just about 8 % less than the peak. It really is still too early to start to see the impact of this on investment, although the depreciation has improved prospects in a few areas of the economy.

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This depreciation of the Australian dollar since April is a pleasant development, and a further depreciation would be helpful in balancing growth in the economy. Ultimately, floating exchange rates modify to the relative profits on capital across countries. When investment in Australia was very high and increasing, and investment elsewhere in the world was very weak and dropping, it was not surprising that the Australian money was at a significant high level. This was a textbook response for an investment boom. But the textbook would also predict that as the mining investment boom in Australia unwinds and, hopefully, investment in the developed economies accumulates, some realignment of the relative value of the Australian money would occur.

This process has started, although it has been interrupted lately, partially because of the changed outlook for all of us financial plan. So an important concern is whether this improvement in self-confidence will be sustained here. A good amount depends upon international events. If global growth is consistent with most forecasters’ central outlook, it is quite possible that self-confidence, both abroad and in Australia, will be sustained at a higher level than it has been recently. There are, however, a variety of things that could fail, with the latest wrangling over the US debt ceiling providing the latest exemplary case of developments that damage confidence just.

But beyond international occasions, domestic plan options also matter. Business confidence – and thus the preparedness to consider risk – is likely to be higher if the policy environment is predictable and there is certainly a strong commitment to ongoing reform to make markets work well and to boost productivity. Making certain rules is fit for purpose is important also. So is ensuring that the overall business environment encourages invention too. These are all difficult areas to get right but doing this is key to creating an environment where business is confident enough to take a risk, buy some new capital, hire a new worker, or expand their operations. The third factor on my list is the reduced level of interest levels.