Dr. Mark Cassidy:

There are elements of that question that I cannot get into but I can say a few things. Current Government policies are considerably reducing the costs and hardships of the crisis. We saw that in some data we published recently where average wages would have declined and, in fact, average incomes in the economy increased last year due to the impact of Government supports. That contribution was greater for lower-income groups. Government policies have already had a positive effect.

The Deputy is asking about the forward-looking situation, once the temporary supports that are now in place are removed and a recovery is under way. The Deputy mentioned public sector investment. Experience shows that it is extremely unwise for an economy to cut back on capital investment following an economic crisis because that has negative effects on the productive capacity of an economy in the long run. That is a key lesson and a mistake was made in the past in that respect. In Ireland, we did not have too much choice because we could not afford to borrow money at the time but investment certainly fell significantly here and elsewhere after the most recent crisis. That has had significant negative effects.

Our advice and recommendation is that, first of all, current temporary policies remain necessary and they need not be removed prematurely. When they are removed, attention needs to be focused on the recovery of the economy. What will be most important there will be measures that reduce scarring effects, particularly long-term unemployment. There will be structural changes. In many ways, the economy will go back to where it was before but not fully. There will be changes in consumer preferences, tastes and habits that have been picked up during the crisis that will be permanent. We will have changes in commuting patterns because of working from home and that will have structural effects on the economy. What policy can do there is to try to gear the economy towards the new reality, including the retraining and upskilling of people. That is a significant way in which policy can have a positive effect.

I earlier mentioned enhancing the productive capacity of the economy. In terms of paying the bill for Covid, I also mentioned the fact that we think the current situation is sustainable. We do not think there is any need for what is commonly called austerity, albeit that can mean different things to different people. Austerity is certainly not required to a degree whereby demand is removed from the economy at a time when the recovery is not established. We firmly believe that when the time is right, public sector debt will need to return. We think that economic growth will do much of the heavy lifting in that respect and that is another reason to emphasise the importance of capital investment. We also think that the general situation in terms of Government balance, including the mix between current expenditure and taxation, will need to move to a more sustainable position, closer to balance or even surplus. With regard to how that is done, I would be getting into a political decision with regard to the distributional effects.