Oireachtas Joint and Select Committees
Wednesday, 24 November 2021
Committee on Budgetary Oversight
Inflation: Discussion (resumed)
Mr. Gabriel Makhlouf:
The Deputy is right to emphasise the supply challenge. The Central Bank has talked about this over the years. Demand-side policies can have a negative effect on inflation. I do not have a specific number to tell the Deputy what the precise proportional balance is. I have said in the past that the supply of housing is a challenge that we need to address in Ireland.
I want to make one clarification point and it is important that everybody bears this in mind. When we talk about inflation and quote numbers about inflation, we do not include the cost of purchasing a house but we do include the impact of rents. That is partly historical. The ECB decided at the end of our strategy review back in July that the cost of owner-occupied housing should be included in the calculation of housing. That is going to require the European statistical authorities to develop a process which can separate out the proportion of a house purchase that is investing in an asset and which should not be included in the measure of inflation from the consumption cost. I mean it is a technical issue but I think it is important that everybody understands the measure of inflation at the moment.