earlier lunches in this series. the resources boom it is now well understood that the “ mining boom ” is shifting gear, and that we are entering a new phase. the story of the boom has always had three phases. 2 in the first phase, commodity prices rose to very high levels. as a result, australia ’ s terms of trade rose to levels not seen in a very long time. these prices had a hiatus in 2009 with the global downturn but resumed their upward trend quite quickly. see anika foundation. see stevens g ( 2012 ), “ producing prosperity ”, rba bulletin, december pp 81 – 87. bis central bankers ’ speeches in historical context, the high prices have been quite persistent. 3 this led to the second phase, in which resource producers ramped up their investment to take advantage of demand for raw materials, in particular iron ore and natural gas, and to a lesser extent coal. resource sector investment rose from an average of about 2 per cent of gdp, where it had spent most of the previous 50 years, to peak at about 8 per cent. that big rise is now over, and a fall is in prospect, with uncertain timing. it could be quite a big fall in due course. the third phase is now under way, in which we will see investment spending fall back, but a lift in volumes shipped of the various commodities. the latter has already started – for iron ore, volumes are rising at about 15 per cent per year – but shipments will probably increase further yet for some time and then stay high. shipments of natural gas will not start increasing strongly until 2015, and will probably have several years of very strong growth, and then remain high for a few decades. in that third phase, real gdp will get a lift. national income measured in current dollars will also get a lift from the higher volumes, but that is likely to be offset in part, at least, by lower prices. the lift in real gdp coming from this rise in exports will be driven more by higher output per person ; in fact, the level of employment needed to extract and ship the materials will be less than the level needed to build the capacity to do so. let ’ s be clear that australians will continue to benefit from the higher level of resources output for a very long time. there has been a large lift in the global demand for natural resources that our country happens to have in abundance. most people agree that the rate of growth of that demand will be lower

a chance on a new product, a new investment or a new worker. in the case of households, according to surveys sentiment is neither particularly weak nor particularly strong at present. it is reasonable to expect that households will play a role in driving demand over the years ahead – and in due course that will help to lift business confidence. but in thinking about that role we need to understand the ways in which household behaviour has changed. the credit boom the title of this talk, “ economic policy after the booms ”, uses the plural quite deliberately. there were two “ booms ”. before the mining boom, or at least before its full flowering from about the middle of last decade, there was an earlier boom. it was global, but australians took part in it. i am referring of course to a boom in credit, which saw a very significant increase in borrowing by households in particular, and a rise in asset values, especially dwellings. this was associated with a lengthy period of unusually strong growth in consumption. bis central bankers ’ speeches this boom did not end in australia as painfully as it did in some other places, but end it did. consider two charts i showed at the anika foundation lunch two years ago in july 2011. these have been updated, and use revised data. 5 graph 1 graph 2 the level of household financial assets from june 2002 has been revised almost 15 per cent higher on average, predominantly reflecting upward revisions to estimates of households'holdings of unlisted equity. as a result, the debt - to - assets ratio has been revised lower by 0. 8 percentage points on average. trend growth in household assets was also revised slightly lower. in contrast, growth in household disposable income was revised slightly higher, leading to a small upward revision in the saving ratio in the 2000s. bis central bankers ’ speeches it is even clearer now than it was two years ago that the behaviour of households has changed in a very important way. real consumption per person had risen faster than real income per person for 30 years, from the mid 1970s until about 2005. ( only the last third of that period is shown here. ) that changed some years ago now, and after a noticeable fall in consumption in late 2008 and early 2009, spending and income have grown roughly on parallel tracks. since 2009, trend growth in per capita consumption has been about 1. 4 per cent per annum, half what it had been from 1995 to 2005. one contributing factor is seen in the second of the