Dr. Mark Cassidy:

I will go back to Deputy Broughan's other questions. He asked about the budgetary situation. I will summarise our position in that we recommended a more ambitious budgetary position should have been taken with a larger surplus for 2019 and beyond. Our main reasoning in this regard was, given high current debt levels, to leave the economy better prepared for Brexit or any other shocks that may come down the line. Up to 2015 or 2016 we saw a substantial improvement in the public finances. This has stalled more recently. The best indicator of this is the primary budget balance, in other words, a budget balance excluding interest payments, which has stabilised or even deteriorated somewhat since 2016. Our view is that during this period the economy has experienced extremely strong economic growth. Growth has outperformed expectations in almost every year. We have seen an unprecedented surge in corporation tax revenues and, as per our previous discussion, we have concerns that this might not be sustainable or might contain a windfall element. The economy is clearly getting closer to full capacity, a time when Government spending should not seek to add overheating pressures or capacity constraints in the economy. We still have extremely high public sector debt. It is the fourth highest in the European Union, at approximately 105% of national income when national income is properly measured as gross national income adjusted. For all of these reasons, we believe the environment was right for a more ambitious fiscal policy and running a higher surplus, and we believe this would have been particularly important not just to reduce overheating pressures but to increase the resilience of the economy to withstand any possible economic shock. As I mentioned in my opening remarks, the risks relate not only to Brexit as there are also significant risks relating to current uncertainties in the global economy, taxation environment and trading regime. I hope this answers the question.

Overall, household debt remains high in Ireland by international standards. It is still measured as a proportion of household disposable income, which is the best measure. It is still the fourth highest in the European Union, standing at approximately 125% to 130% of household disposable income. It is clearly on a downward trend, having picked up extremely quickly following the crisis. It has been on a steady downward trend for two reasons, namely, that households have been paying off their debt as part of a deleveraging process and, more noticeably, as household incomes increase, the ratio will decline. It is falling by approximately ten percentage points per annum. If current trends continue, this means it would fall below 100% in the coming years. It remains rather high but the more it falls, the more resilient to any future shock the economy becomes. The position we are in now, which is a legacy of the crisis, is that Irish households overall, particularly certain cohorts, including those age groups that bought houses during the early 2000s, have extremely high debt. This makes them extremely vulnerable in terms of any shock to income or house prices. This reinforces the need for overall economic prudence. The banks' contribution in this regard, the mortgage market measures, is also important.