CAPITAL INPUTS

Between 1985-86 and 2005-06 growth in capital services averaged 3.9% per year. Capital services grew strongly between 1985-86 and 1989-90, and then slowed over the first half of the 1990s. Figure 7.3 shows that growth in capital services accelerated from the beginning of the decade.

Capital services are predominantly driven by investment in machinery and equipment. Growth in the volume of total gross fixed capital formation (GFCF) fluctuated between 1985-86 and 1996-97 (figure 7.6). After 1996-97, GFCF growth was very strong. The bulk of this investment came from machinery and equipment.

Further to the growth in GFCF, rental price weights also influence capital services. Figure 7.7 shows assets with relatively large rental price weights are motor vehicles, non-dwelling construction and industrial machinery and equipment. The reason non-dwelling construction has such a large weight is due to the realised rate of return being higher than expected.

Figure 7.8 shows motor vehicles and non-dwelling construction productive capital stock increased strongly over the second half of the 1980s with no growth since then. Growth in electrical and electronic equipment and industrial machinery and equipment stock accelerated from 1997-98 onwards.

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