Dr. Martin O'Brien:

I can talk a little about profit margins. The Cathaoirleach is correct that measuring this is quite difficult. We look at the GDP deflator to try to understand the relativity of profits to firms and wages. There is a number of ways of looking at this and there are dynamics that cross the two of them. Potentially what we will see going forward, given that we have seen a small increase in profit margins for firms, is capacity for wages to grow, absent of more cost pressures in terms of inflation. That is the judgment we are trying to make right now. Firms saw a large increase in their input costs and we saw them develop large amounts of inventory because there was uncertainty. We are seeing those inventories wind down now. Firms are starting to see normality in their supply chains. As we look forward, we see that there is scope or potential for limited wage growth to catch up without causing inflationary pressures. Of course, that is exactly the dynamic we are watching very closely, as is the ECB.

In terms of the wages and profits dimension and the difficulty of actually understanding how these are evolving, some of the shifts in the labour market that Dr. Kelly mentioned, with people moving from one sector to another with the same skills - often moving from a lower-paid sector to a higher-paid one but doing a very similar job - has distorted an awful lot of the numbers that we are looking at as we try to figure out how wages have grown. When we try to look through that, we might look at a person who has been working in the same job and doing the same number of hours from before the pandemic to now and we see that his or her wages have grown quite healthily, perhaps more so than what we see in some of the averages or some of the headline numbers that are published in this regard. It is only now when we are past the period of having the wage supports and all of the things that were influencing some of the headline numbers that we are actually getting a little bit of a truer sense of underlying wage growth. All of the demand and supply factors are ultimately going to drive wage rates through this year in particular. I would just add that caveat that when we are looking back at some of the headline numbers published by the CSO on wages, they do not necessarily capture the full story of all of the underlying dynamics in the labour market.