Dr. Kieran McQuinn:

I will take the first question on household savings and the question on capital expenditure. The big question for macroeconomists in the aftermath of the pandemic has been, in terms of the strength of the likely recovery and bounce-back in economies, what will happen to the savings levels that people have accumulated. There is no doubt that savings levels did increase significantly during the pandemic for a number of reasons. At this stage it is hard to say definitively because we do not have the actual data. We are still forecasting and it is a very unprecedented situation that we have this kind of increase in savings to the extent that we have had. Preliminary evidence at an international level seems to suggest that people are looking at the housing market as an area to increase their expenditure levels and, possibly, to divest some of their savings into. We would see that as being something that is likely to occur in the domestic market for a number of obvious reasons. We have talked about the imbalance between supply and demand and the market. This was an issue before Covid and Covid has clearly had an impact on the supply side of the housing market. There is a danger going forward. I mean that people will now feel that there is a bigger imbalance but people are also aware of that. I will not say that there will be frenzied behaviour but the expectations that people have in this regard are important. I mean if people think there is going to be a shortage of housing then people will start to try to buy housing today because they are afraid that in six months or 12 months time that housing will be even more expensive. That is where one could see a considerable amount of these savings going into the housing market.

In terms of what to do about that, like everything to do with the housing market, the ultimate solution to the problem is to increase supply. The bottom line is that we need to significantly increase the supply of housing over the coming years as a way of dealing with the problems; in particular we must provide more social and affordable housing. We have extensively talked about the big problem that is the high cost of housing here when compared with other jurisdictions.

Capital expenditure is the flipside of the increased expenditure on housing. Again, the points that I made to Deputy Boyd Barrett are relevant. The Government has committed to increased capital expenditure on housing. I think there will be increased capital expenditure to do with the environmental challenge and also possibly in other areas such as Sláintecare and the like. One needs to maintain discipline on the current expenditure side because, without doubt, the economy will grow quite strongly over the coming years. The employment rate has fallen quicker than any of us would have imagined so one will get to a stage where the unemployment rate could become very low again, which would indicate there is very little slack in the economy, and the danger of overheating could come into play. It is important the Government is relatively disciplined when it comes to current expenditure. That means taxation cuts would be very hard to justify in that context and it would need to maintain a certain discipline in terms of areas around public sector pay. Those are the kinds of challenges that we face from a macro point of view. If we are going to increase capital expenditure then we must ensure we do not overheat the economy.