Dr. Kieran McQuinn:

In referencing the next ten years, we were looking at the forecast horizon. In regard to the medium term, a great deal of work has been done on the future of interest rates and where they are likely to go. Many people have looked at this issue over recent years. Some of the most interesting work ties it in very closely with issues around demographics. If one parks the pandemic issue, we have had low interest rates across most western economies for some time now. The factors behind that, particularly in Europe, are demographic issues as the population becomes more ageing and also the slowdown we have observed generally in western economies in terms of productivity growth. As long as we have those two forces and trends, it is unlikely there will be any great substantial upper pressure on interest rates over the medium-term. Evidence of that is the sluggish inflationary figures we have observed across Europe over recent years.

In terms of the long-run factors that determine long-term interest rates, it is hard to see upper pressures in that regard. That does not mean people should conduct their fiscal policy assuming there will never be an increase in interest rates over the medium or longer term. It is safe to say that in the short to medium term there is unlikely to be a substantial pick-up in interest rates, certainly at a European level. The other point to remember, which we stress in the opening statement, is that we are likely to experience sharper and more accelerated growth rates than most European countries coming out of the pandemic. We entered the pandemic with strong growth rates and I think we will come out of it with strong growth rates. On average, growth rates in Europe are probably going to be less than what they are in the Irish economy. This means that, in general, monetary policy will favour a low interest rate environment for the foreseeable future.

The other question was on remote working. It is a very interesting question. We tried to tease it out a little in our work on the housing issue for the Department of Housing, Local Government and Heritage on how the pandemic would impact the housing market. At this stage, much of our work and thoughts on the issue are governed more by anecdotal evidence than anything else. There is no tangible evidence of that. My guess is that going forward - the institute is probably an example of this - there will be growth in blended working arrangements. There will be some return to offices over the next six to 12 months, particularly as the economy opens up. I do not think there will be a wholesale movement to remote working, but, equally, there will not be a return to everybody going into the office five days per week. That will present some challenges for businesses such as retail, particularly in city centres, but it also offers some opportunities in terms of the possibility of people being able to relocate to areas where, for example, housing is cheaper, there is less congestion and from which they do not have to undertake arduous commutes on a day-to-day basis. There will be opportunities but, equally, there will be challenges in that. On balance, we are more likely to see a blended style arrangement going forward rather than one extreme or the other.