with this sort of analysis is that the average number of people in each household changes over time in response to a range of things, including the cost of housing. over the 20th century, demographic and social factors, such as a declining birth rate and rising separation rate, were accommodated by growth in the dwelling stock outpacing that of the population. in other words, there was a downward trend in the number of people in each household ( graph 12 ). a very similar change was also evident across advanced economies. however, over the past decade or so, these trends have abated and we ’ ve seen the average household size stabilise. indeed, the higher level of house prices and rents ( relative to see hsieh w, d norman and d orsmond ( 2012 ), “ supply - side issues in the housing sector ”, rba bulletin, september, pp 11 – 19. bis central bankers ’ speeches incomes ) may have been somewhat of a constraint on household formation and therefore demand for new housing. this leads me to what i think is arguably a better way to judge the strength of demand versus supply, which is to look at what prices and rents have been doing. what this suggests is that demand has shown some signs of strengthening relative to supply. in particular, housing prices are no longer declining relative to incomes ( graph 13 ). also, the rental market appears to be relatively tight. vacancy rates have been quite low since 2006 in comparison to the average since the early 1990s, and ( with a small delay ) this has led to rents rising relative to incomes and remaining relatively stable at around levels seen during previous cyclical peaks ( graph 14 ). the growth in rents has also meant that conditions for investors have become more favourable, with ( gross ) rental yields increasing across the capital cities. our liaison with the housing industry confirms that demand for new housing has been more positive over recent months. at the same time, however, our contacts note that conditions still remain relatively subdued in most states. in particular, they report that prices for the construction of new dwellings have been held down in response to weak demand, with discounting still reported across the market, including for new developments. not surprisingly, developers have found a lack of buyer urgency during the earlier period of declining dwelling prices. in addition, they note instances of some earlier sales made off the plan falling through ahead of settlement, apparently due to caution by lenders regarding valuations and strict lending practices for new developments. summary let

policy. for the past twenty years, the meetings have been held on the first tuesday of each month, except in january. of course, meetings can be convened at any time, if needed, and the board can be contacted by phone in the event of some urgent matter. such events are rare, though they have occurred occasionally in the past. it has come to be regarded as a good thing, however, that policy decisions are, in normal circumstances, taken at meetings with a known schedule. such a schedule for decision - making meetings, as well as for regular documents ( such as the quarterly statement on monetary policy ) is increasingly the norm internationally. even some countries that do not have a decision - making board have established a fixed timetable for making and announcing decisions on monetary policy. this is quite efficient, in that it helps financial markets and other observers in allocating their own resources – they know when to pay attention! – and lessens unnecessary speculative activity. internal processes the monthly schedule naturally provides the rhythm for the staff ’ s efforts. in the case of the economic group, the process begins about two weeks or so before the board meeting date ( that is, not long after the previous meeting has finished ). relevant desk staff who monitor the data flow begin the preparation of comprehensive documents giving details of all the relevant information. this documentation ultimately forms part of the detailed briefing paper on the economy presented to the board, and is updated continually as the information comes in ( some of the key data, like the cpi, typically come in quite late in the process ). at the same time as the documents are in preparation, there is a sequence of meetings. around twelve days prior to the board meeting, we in the economic group hold a staff meeting to focus on the available economic information. we review data on the rest of the world, domestic economic activity, prices, wages, the labour market, and financial conditions. the full range of economic data is quite extensive : we track over 2000 data series on the australian and international economy. hence the focus has to be on those pieces of information that are most significant and potentially view - changing. we are also exposed to relevant pieces of analytical or research work which can inform our assessment of the economy ’ s development. at this meeting, there is a good deal of questioning about various elements of the figures, and in particular about apparent contradictions or tensions which inevitably arise in the short run data flow. much of the process of data analysis for the purposes of policy