Professor Michael McMahon:

I will build on the last answer given. When thinking about the borrowing risk, my view would be that the risk is not that the borrowing is the trigger but rather that high levels of borrowing limits the ability of the economy to respond to other triggers that might arise.

I will respond to the Deputy’s specific question about the effect of an unwind of savings. We know that saving rates have been high. This is partly because people have become more prudent, but partly also because there has been enforced lack of spending in the economy over the last 18 months during lockdown. The question about whether this will generate inflation depends a lot on how quickly and in which sectors people choose to spend the money. Again, touching on Mr. Barnes’s opening statement, one concern would be that people have built up sufficient savings and they all decide to invest, for instance, in housing. At the same time, the Government is embarking a large expansion of its public construction projects. That would put quite a bit of pressure on that particular sector, which is already subject to many cost pressures coming through supply chains. These pressures are completely outside of the control of Ireland, namely, world steel prices, cement prices, etc. That would be a scenario where the likely inflationary effects would be larger and concentrated in particular sectors. If everybody spent their money on doing things that they did before, such as spending in the hospitality sector, there will probably be a less likely focus on inflation. This is because there will probably still be quite a lot of spare capacity. That is where we would currently probably see a need for any targeted support from the economy going forward. That unwinding of savings into those sectors would limit the need for the Government to continue to provide that targeted support. The Deputy’s question is difficult to answer, because it depends on exactly how people choose to spend the money. However, this is something that we are very aware of as a potential thing to keep an eye on and see how savings choose to be unwound.