has increased so that it now once again exceeds that of the population. reflecting this increase, the share of gdp accounted for by the building of new dwellings has risen significantly and is now close to the various peaks reached over the past 50 years ( graph 7 ). notwithstanding this, with spending on alterations and additions being relatively subdued, overall investment on residential construction remains some way below the previous peaks. this increase in the supply of dwellings has come on the back of a large run - up in housing prices in australia's two largest cities. but the increase in supply now looks to be contributing to some moderation in the rate of increase in housing prices in these cities. it is also putting downward pressure on rents, with the cpi measure of rent inflation running at just 1. 2 per cent in 2015, the lowest for 20 years ( graph 8 ). whether or not these trends are maintained remains to be seen, and so we continue to watch developments in the housing market very closely. however, the overall picture does appear to be one of a better balance between supply and demand than was the case in 2010. as i noted earlier, the lift in residential construction has been an important element in the cyclical rebalancing of the economy. in the period ahead, we can expect a further increase in residential construction, although at a slower rate than took place last year. while this more modest increase will mean a more modest boost to overall gdp growth from home - building, it should assist with the sustainability of the current boom in residential construction. it is unlikely to be in our collective interest to have a further surge in the construction of new dwellings, as a share of the economy, then to be followed by what would surely be a larger and more prolonged decline later on. overall, the recent data on building approvals suggest that we are on a reasonable path here. from a longer - term perspective, the challenge of providing an adequate supply of reasonably priced housing for an increasing population rests largely on the flexibility of land supply and, in particular, the supply of well - located land. this is because high housing costs largely reflect high land prices, not high construction costs. here, it is zoning regulations and the transportation infrastructure that can make a material difference. in both areas, progress has been made since 2010, but there is more to be done. inflation the final issue is the inflation outlook. six years ago, inflation rates in almost all advanced economies were below the midpoint of central bank targets. this

than for australia, so australia ’ s relative performance improved towards the end of this 50 - year period. while economic growth in australia was lower than for the oecd on average over the 1950s and 1960s, it was higher in the 1980s and 1990s, with the biggest advantage in australia ’ s favour occurring in the 1990s. alan blinder, “ hard heads, soft hearts : tough - minded economics for a just society ”, addison - wesley, 1987. e a boehm identified two recessions in the 1970s, the first in 1974 and the second from august 1976 to october 1977. see “ the usefulness and applications of economic indicator analysis ”, institute for applied economic and social research working paper no. 9, 1989. table 1 real gdp growth - average annual rate australia oecd 1950s 1960s 1970s 1980s 1990s 4. 2 5. 3 5. 4 5. 2 3. 4 3. 5 3. 3 2. 6 3. 3 2. 1 this is a surprise to some people and one response is to query it on the grounds that our recent relatively buoyant economic growth could have been mainly the result of our faster population growth. table 2 examines this issue by taking out the effect of population growth and looking at real gdp per capita over the same five decades. on this basis, the recent relative improvement is now more pronounced than in the earlier table. the 1990s not only shows a pick - up in australia ’ s growth of real gdp per capita compared with the two previous decades, but it is the only decade in which australian gdp per capita has grown faster than the oecd area, and by an appreciable amount. table 2 real gdp growth per capita - average annual rate australia oecd 1950s 1960s 1970s 1980s 1990s 1. 8 3. 5 3. 3 3. 9 1. 7 2. 4 1. 7 1. 8 2. 1 1. 3 i do not want to suggest that our recent economic performance means that we have returned to a golden age such as we had in the immediate postwar period. nor do i wish to deny that there is still a backlog of remedial work to be done - our unemployment rate being an obvious example. but, on the other hand, we must be doing something right. our expansion so far in the 1990s has outlasted its predecessors in the 1970s and 1980s, and it is still going strong. we have withstood a difficult external shock, and should be able to sustain