Even though the labor market is tight, the pickup we’ve seen in wages growth has been fairly modest so far. There’s a noticeable pickup there, but it’s not huge at this stage.

A pattern of growth that was heavily skewed towards household spending was not going to be able to continue indefinitely, and the balance-sheet adjustment now occurring in the household sector should reduce the risk of...

What we have been seeing is a change in the composition of growth, with businesses rather than households now the main drivers of growth in domestic spending.

The increase in business investment now underway will in due course add to the economy’s productive capacity. It also offers the prospect of a pick-up in export volumes, particularly in the resources sector.

Having said that, however, I should note that the current downturn in this sector is an unusually mild one compared with previous cycles.

It is not hard to appreciate that this provides a significant boost to incomes and spending. With exports representing about a fifth of GDP, each 10 percent increase in the terms of trade adds about...