Professor Peter Clinch:

It is a very good point. Part of our job is to ensure people do not look at the inflation rate and say that it is fine; that they do not look at the productivity growth rate and say that it is fine; and that they do not look at the GDP growth rate and say that it is fine. There is a lot happening underneath the hood. The Chairman is quite right. We might have a low inflation rate but we are coming from a high base.

It is always difficult in terms of how we operate. There are so many things at work that underpin how an economy works, from particular sectoral and overall pay agreements through to us being a price taker in so many areas: our dependence on imported energy for example. We are also a small economy so we do not get the economies of scale that other economies get. There are also areas that are very difficult to compare. We just had a great conversation about the importance of data. It is very hard to compare, for example, administrative costs in the planning system because it is quite difficult to assess what they are.

One of Ireland's biggest challenges is in the boom-and-bust cycles we have had over the years. As a highly globalised economy, we tend to have some large growth periods and then, as we saw recently, some significant downturns. In the last downturn we saw a dramatic correction in costs. Because of cyclical cost competitiveness adjustment the economy crashed and all of a sudden there was more supply of products, services, housing and property. Prices were pushed down and we had a major competitiveness correction as well as some very beneficial external factors that were beyond our control.

We should also remember we had a very good capital stock as we came out of the crash. Large investment in our roads and other infrastructure had happened in the run-up to the crisis. Therefore when we emerged we were able to grow at a very fast rate yet not have price rises for a few years. There may have been a failure to anticipate how quickly we would grow and how quickly we needed to invest in certain areas of the economy, particularly in capital spending which had taken a huge cut and is still well below our competitor countries even with the Project Ireland 2040 plan put in place.

Infrastructure spending and spending on innovation, research and development - in other words soft and hard infrastructure - are critical for providing productivity growth in areas where we cannot control prices and might be a price taker. When it comes to economic policy a sustainable macro-environment is very important for competitiveness. If there are big ups and downs in GDP growth and the performance in the economy, we will have big variations in the price level and essentially, as is happening now, we inevitably lose competitiveness as prices increase.

The good news would be if essentially the economic growth rate slows but we do not, as we did previously, go beyond our productivity performance and find ourselves on an unsustainable path. However, of course, it depends greatly on what happens internationally.