Dr. Mark Cassidy:

I have that here. These are all extremely important issues for the economy at the moment. Let me first deal with the issue of overheating and employment trends. It is important to emphasise that we do not currently see overheating in the economy. Prices and wages remain contained. Unlike a decade ago, we are certainly not seeing any signs that economic growth is being fuelled by either excessive domestic credit or inflows of money from abroad. The situation now is very different to then. We are seeing that the unemployment rate has been falling steadily. We are getting closer to a position of full capacity and there are signs of increasing tightness in the labour market. There has clearly been an uptick in wages. Figures released this week show that the average increase in weekly wages during the final quarter of last year was 4.1%, up from 3.5% in the previous quarter. There has also been an increase in job vacancy rates which is now at an historically high level. There has also been an increase in job switching rates, the rate at which people are switching jobs within an economy, and we have produced an analysis of this year which shows that this tends to be an indicator that further wage increases are on the way. While we do not currently see overheating, we are seeing signs of getting closer to full capacity.

Within the labour market, some sectors are clearly experiencing more pressures because of a shortage of available workers which is leading to higher wages in those sectors. The sector that particularly stands out is the information and communication technology services sector. Wages in this very fast-growing sector are increasing by approximately 7%, which is perhaps what one would expect.

Across the rest of the economy, employment growth is strongest in the construction sector. I will come back to that in a moment because it relates to the second part of Deputy O'Brien's question. Employment in construction increased by about 11% over the past year. We are also seeing strong employment growth in accommodation and food services and in sectors like education and public administration. It is quite broad based across the economy.

Wage increases are fastest and vacancy rates highest in some of the modern services sectors. Aside from the information and communication technology, there is a high vacancy rate in financial and professional services. Wage pressure is more contained in other, more traditional parts of the economy.

Our concern is not that we currently see overheating but we are looking out for whether wages and prices start to increase at a faster rate than might be justified by the performance of the economy. We are not seeing that now. The increase in wages across the economy is very welcome, particularly because of the wage cuts and moderation experienced by so many after the financial crisis. It is right that the benefits of economic growth are being spread. This is a cautionary word about ensuring we do not get into the position we got into in the past.

There are things to do with supply, labour demands and the differences between the different elements of the sector when considering the housing market. I share the consensus that the main issue currently facing the housing market is a shortage of supply. Housing supply last year was around 18,000 units which is extremely low in comparison with the needs of the economy. The medium-term needs of the economy are probably somewhere closer to 35,000 or 40,000 units a year so 18,000 was well short of that. Housing supply is picking up at a strong rate. It is increasing by maybe 25% a year but this still only brings us up to about 23,000 units this year and 28,000 units next year. Even by 2020, the number of houses being built will still not be enough to meet the needs of the economy. This means pressures will manifest themselves in both prices and rents. The pressures in the rental market have been much greater than in the housing market for a number of years. House prices are still approximately 20% below where they were before the crisis, whereas rents are now significantly above where they were in 2007.

I was asked about regional trends. Prices first began to pick up in Dublin and this was followed by the rest of the country but the rate of both price increases and rental increases across Dublin is now lower than in the rest of the country. Price increases in Dublin are running at between 3.5% and 4% per year, compared to 6.5% nationwide. This probably reflects a couple of factors. One may be the earlier pick-up in prices in Dublin but affordability is also a factor. Prices and rents rose high enough to become less affordable, pushing the price pressure to regions outside Dublin. Another interesting trend is lower-priced houses increasing at a much faster rate. Prices at the higher levels are flat or declining and, because prices are generally higher in Dublin, this leads to a slower overall increase in the capital.

I was asked about the supply of houses. We did an analysis of what was required to address the deficit in the housing sector in coming years, in particular the availability of construction sector workers. The author was Dr. Conefrey.