1922. wages also plummeted ; for an industrial worker, for instance, the wage level fell more than 35 per cent in the course of about 18 months. firms were caught in a vice, squeezed on all sides by steeply falling prices. as always, the firms that suffered most were those with inflated profits, over - valued assets and large misplaced investments. the abrupt plunge into a depression was followed by an equally sudden recovery. manufacturing output rose around 1922 and annual growth in the following years up to 1929 averaged as much as 4 per cent. so what was the attitude to economic policy in those days? on the whole, the depression, with falling prices and rising unemployment, was seen as a necessary evil, a purgatory that would result in a spontaneous recovery to economic balance. as regards stabilisation policy in one form or another, the primary responsibility rested with the riksbank. in practice, however, policy was passive and tardy. a look at the wholesale price index from 1913 to 1920 shows that the increase in sweden was almost twice that in the united states, for example. in time, the interest rate was raised and the supply of credit was restricted. however, the tighter monetary stance was then retained even after activity had turned downwards. the reason was that the riksbank tried to bring the swedish krona back to its par value in 1913 in order to rejoin the gold standard. as a result, at the beginning of 1921 the interest rate was around 6 per cent at a time when prices were falling about 20 per cent. schon, l ( 2000 ), en modern svensk ekonomisk historia ( a modern swedish economic history ), sns forlag, stockholm. fiscal policy was based on other criteria than those of stabilisation policy. built - in stabilisers did exist, for instance in the form of unemployment support, but the benefits were low in order to strengthen the incentive to search for new employment. this did work – when the upturn came in february 1922 the number of persons on relief work or the dole was over 100, 000 ; by the end of 1923 the figure had dropped to 6, 000 – but the flexibility did, of course, exact a price in the form of social hardship. stabilisation policy ’ s emergence in contrast to the lack of an active economic policy in the period around 1920, decision - makers in the 1930s had high ambitions, underpinned by a nascent stabilisation policy

##a has had quite a bit to say about it. a misconception that we still see from time to time is that some people seem to think we have been concerned mainly about excessive rates of construction. construction has been very strong, and there may be over - supply in some areas. but our main concern has not been about the addition of 130, 000 to 150, 000 new dwellings each year. rather we have been worried by the market for the existing 7½ million dwellings and the way in which they were changing hands for higher and higher prices, with an associated build - up in debt levels. that is, we have been worried about the housing market as an asset market, and about the borrowing behaviour of participants in that market. the concern was not out of a desire to target house prices, but more over the potential risks to macroeconomic stability from a major boom - and possible bust - in the household sector ’ s main asset class. on the most recent readings, there has been a distinct softening in most of the major housing markets, with more than one data series showing an outright fall in prices in the march quarter in several cities. this was associated with a decline in the demand for credit, though on the most recent data that demand still seems very strong. house prices in brisbane and the gold coast declined a little on these measures, though not by as much as those further south. median house prices $'000 $'000 sydney gold coast melbourne brisbane source : australian property monitors in our judgement, this is a welcome development. while various fundamental reasons can be advanced for dwelling prices to have risen noticeably in the 1990s, it was hard to avoid the conclusion that strong speculative forces were at work over the past couple of years. that was not a healthy state of affairs and the sooner it passed, the better. it is just about impossible, of course, to predict with any precision how all of this will unfold from here. much will depend on what else is occurring in the economy. in individual cases, the extent of leverage will be very important. my own view is that the palpable sense of disappointment being felt by many leveraged investors in residential property is likely to grow further for the next year or so, possibly longer. for many owner - occupiers, on the other hand, a moderate decline in prices should not create major discomfort, in an environment of ongoing growth in employment and wages, as well as reduced taxes. in fact, it is hard