Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank Deputy Durkan for his question. We are seeing an increase in inflation. I believe the latest figures from the Central Statistics Office, CSO, put it at 2.8% in the period to August of this year. In a sense, it was an inevitability in the immediate rebound coming out of Covid and the burst of economic activity that we have experienced on foot of the pent-up demand, as many sectors and services were either impaired or fully shut down over the period of Covid. We are now seeing the outcome of all of that play out.

There is also a range of international factors. We are all witnessing the increases in electricity prices and in fuel costs generally. We acknowledge as a Government that this places an obligation on us to take account of that and to respond in the context of the budget, and that is what we will do.

We also acknowledge the comments made by the European Central Bank and its monitoring of inflation across the eurozone. In broad terms, it is fair to say that it believes the current trend is a temporary one. The European Central Bank is monitoring very closely what it regards as the underlying inflation trend across the eurozone because, of course, we have benefited very significantly from the bond purchase programme.

The exceptional interventions of the European Central Bank in the markets have helped to keep borrowing costs low for Ireland over the past 18 months or so. Undoubtedly, that is what has helped us to fund the additional spending on services and on income support for households, businesses, etc. We equally acknowledge that this will not continue forever. The European Central Bank will keep a very close eye on inflationary pressures across the eurozone and will stand ready over the course of next year to adjust its policies accordingly.

From our perspective, we see recovery taking hold in Ireland over the period ahead through a number of means. We will have a really ambitious public capital investment programme and will be spending approximately €11 billion next year on that capital programme, in health, in education, in housing, in transport and in climate action measures to name but a few. We will spend up to €50 billion of direct Exchequer capital over the next four years, from 2022 to 2025.

There is, of course, risk in the way in which we will taper off and gradually unwind the Covid supports. There may well be businesses that are surviving by virtue of those supports. The removal of those supports over time may well raise fundamental questions for some of those businesses but that day will have to be faced at some point in time because these supports cannot continue indefinitely.

Overall, we recognise that there is a strong rebound under way. We anticipate that this will transition to a strong recovery. The fiscal advisory council has, I understand, endorsed the latest economic forecasts that have been made by the Department of Finance and those will be published imminently. There are strong grounds for optimism that both in terms of foreign direct investment and in the domestic economy, the recovery is sustainable. We face challenges for sure, but the Government is determined to work its way through them and to help the recovery through its investment and through its supports and by not prematurely or abruptly ending the supports that are such a vital lifeline for so many businesses around the country.