Dr. Karina Doorley:

I will address the last point as well. When we talk about targeting, this brings us back to the comment made by Deputy Boyd Barrett. What we are thinking about in this regard are those worst affected by inflation and we know those are people on low incomes, rural households and elderly households. These are also the households less likely to see wage growth this year. The Central Bank has forecast that wage growth this year will be approximately 3.3%, but those very low-income and elderly households are probably not going to see any of that.

The best way to target those households is through the social welfare system and existing payments that do not require new means tests or lots of administration. The next best way that is administratively simple is to use flat-rate credits or flat-rate cash payments, like the electricity credit. The electricity credit represents a higher share of disposable income for low-income households than it does for high-income assaults. This makes it progressive, even though it is a flat rate-paid to all households.

The tricky aspect is that it is hard to target middle-income households through the tax and welfare system. Most middle-income households earn too much to be in receipt of social welfare payments and they might not earn enough to benefit from tax cuts. Even if taxes are cut to target those people, most of the benefit of that expense will accrue to high-income households. Therefore, it is very difficult to target middle-income households alone, whereas it is much easier to target low-income households. The electricity credit is another way to do this. It goes to everybody, but as a proportion of disposable income, it represents more for low- and middle-income households than it does for high-income households.