it was inevitable - that this frenzy had to end in the second half of the year, with the reversal coinciding with what was probably the natural inflection - point of the building cycle. this conjuncture gave rise to the sharpest quarterly fall in housing activity ever recorded in the australian statistics ( and the largest half - yearly fall too - by a large margin ). overall, the september quarter was hard to evaluate, because of the effect of the olympics - where sports - crazed fans added to demand by spending their money on getting to the games, and subtracted from it by staying at home to watch on tv. if we take out dwellings and a crude adjustment for the olympics, we note that the remaining 95 per cent of the economy was growing at a rate of a little under 4 per cent through 2000 ( in fact, a little faster in the second half than in the first ). you might say that the profile of residential construction should have been predicted ( and in its broad outline was certainly foreseen ). what was not foreseen was, first, the size of this fall and, second, the degree of confidence - sapping annoyance with the administration of the gst. the basic point here is clear : without the " tail " of the construction sector wagging the dog of gdp, any slowdown would have been moderate, thus continuing the economic performance of the 1990s. ( b ) cost pressures business confidence, particularly that of small businesses, was falling well before the gdp figures were made public. part of this was clearly related to the decline in the housing sector and part to difficulties which small business was having in adapting to the administration of the gst. but, by january 2001, there was another piece of data pointing to an additional factor. paradoxically, it was the unexpectedly good performance of the cpi in the december quarter. the second half of the year had seen three strong cost - push inflationary pressures - the gst adding 10 per cent to many prices ; an exchange rate which had fallen 15 per cent over the first ten months of 2000 ; and a world petroleum price which was 87 per cent higher ( in terms of australian dollars ) than eighteen months earlier. the cost - push pressures from oil and the exchange rate were showing quite clearly in producer prices, with input prices for manufacturing rising by almost 20 per cent during the calendar year. faced with these cost pressures, it looks as though many producers ( particularly in manufacturing ) found it difficult or impossible

- standing challenge for statisticians. there is the challenge of appropriately capturing changes in quality and there is also the challenge of ensuring that the weights used to aggregate the prices of the various goods and services appropriately reflect households'expenditure patterns. for example, it may take some time for new goods and services to be included in the cpi basket. more generally, there is the issue of ensuring that the cpi appropriately takes account of changing expenditure patterns in response to movements in relative prices. the abs has recently begun updating its cpi weights to reflect changing household expenditure patterns on a more frequent basis, which should reduce the size of this ‘ substitution bias ’ in the future. http : / / www. rba. gov. au / speeches / 2018 / sp - dg - 2018 - 08 - 22. html 10 / 23 22 / 08 / 2018 low inflation | speeches | rba housing the cost of housing services has a large weight in the cpi, with the weight about equally split between the cost of building a new home and the cost of renting ( graph 8 ). there have been quite divergent dynamics in each of these two components in recent years. graph 8 new dwelling costs new dwelling cost inflation, which has an 8 per cent weight in the cpi basket, has tended to move closely with the residential building cycle over time ( graph 9 ). [ 6 ] however, despite the historically high level of activity in housing construction over recent years, new dwelling cost inflation has been running at a bit below its long - run average. during the late 2000s, new dwelling cost inflation was higher than it is currently because the residential construction sector was competing for materials and labour with the resources sector in the midst of its investment boom. this competition for inputs has clearly abated. wages growth in housing construction has been generally contained except for some particular skills such as bricklayers, in part because workers have been moving from the resources sector as projects there finished and also reflecting the general slow pace of wages growth in the economy. reports from liaison suggest that competition for inputs between public infrastructure projects and high - rise residential developments has put some upward pressure on new http : / / www. rba. gov. au / speeches / 2018 / sp - dg - 2018 - 08 - 22. html 11 / 23 22 / 08 / 2018 low inflation | speeches | rba dwelling cost inflation in sydney and melbourne. this includes competition for labour such as engineers and project managers, as well as competition for materials such as