Professor Karl Whelan:

I have given one golf club analogy and unfortunately, it is not a silver-bullet-shaped golf club. I will echo some of what the Deputy has said. Economists sometimes underplay inflation as a problem. They say inflation is 4% to 5%, but if people are, on average, getting wage increases of 4% to 5%, then everybody comes out of it not really worse off and it is an annoyance prices are going up. People get annoyed prices are going up, but think they deserve that 4% wage increase. The problem is no individual or business is the average person or business. As the Deputy pointed out with farming, when one sees inflationary pressures and increased costs, businesses that can pass those costs on will cope fine and those that cannot, will not cope fine.

However, there are analogies beyond business. People on fixed incomes which will not go up with inflation will do badly. Somebody who has an investment portfolio on the stock market will do better because the firms charging these higher prices will end up getting higher profits. The higher levels of inflation we have seen over the past few years unleash a set of distributional questions. Distributional and sectoral questions are not easily dealt with. If the high inflation of the coming years is tough on the farming sector, there may be a European approach with the CAP, farming subsidies and so on. This is another area in which the Government has left Brussels as the major player, as opposed to the Department of agriculture.