Dr. Kieran McQuinn:

If one thinks of the challenges confronting the economy at present, some, particularly around inflation, are generated externally. If one thinks back to the original reason why inflation started to increase, it was due to the kind of post-Covid-19 issues around supply chains which were not coming back on stream quickly enough to meet demand globally. Then one had the war in Ukraine which caused very significant energy price issues. It is very difficult because the Government cannot do very much to directly address those issues but what it can and has been doing is providing quite a degree of income and welfare support to sustain and to provide some comfort to households as they face the very significant costs over the past period of time.

Dr. Keane’s point in this regard is important in this context in seeing how one can incorporate those one-off measures and how best to address that going forward. It is a question then of whether we need a spate of measures again or whether the economy is in an inflationary position that households do not need quite the support that they had in the last budget, for example.

The main issue which faces most people, as we have been just discussing, and the most significant cost being domestically generated, is the housing issue and costs. That is clearly an issue which is ongoing for people, both through high house prices but also through high rents. The rent levels have been very high over the past period of time.

Again it comes back to this issue that there are no magic remedies there and that this is essentially a problem of an imbalance between supply and demand. Unfortunately, we saw that supply levels were beginning to come back up albeit from a very low level around 2018 and 2019, so one was beginning to see an increase in housing supply levels at that time. Covid-19 did intervene and caused a slowdown in construction in 2020. There was a big surge in 2021 when everybody went back to work. Covid-19 definitely caused problems on the supply side of the market and as one comes out of Covid now into a more stable period, one is looking at 29,000 to 30,000 housing units this year and probably 30,000 units plus next year.

It is clear that the upward trajectory is positive and one is seeing more supply coming on stream. It is not coming on stream quickly enough to deal with the kind of pent-up demand that is there which is an ongoing issue. The only way to address that is to facilitate greater housing supply over the short to medium term. That is why we discussed some of the opportunities that are there now because of the very significant increase in corporation tax receipts which the Exchequer has been in receipt of in the past few years. There is an opportunity to address these issues as significant funding has been provided but, as I said earlier, more funding may need to be provided because of the high interest rates that will weigh down particularly on the supply side of the housing market.

This will basically be done through a prudent use of those funds and of the National Reserve Fund. The idea is a fundamentally prudent one in the sense that one is looking at the very significant surge in funds that we have been in receipt of in the past couple of years and asking how much of this do we think is permanent in nature and will continue to go on over the next couple of years, and how much of that increase is transitory and we do not really believe will continue to surge. It is then a question of separating out those funds and essentially using the funds one perceives to be transitory, once off or are not likely to continue for once-off capital investment projects. That is fundamentally a good idea.

There is also the opportunity to address other investment needs in the economy. There are issues around climate change, for example, which will require very significant amounts of investment in the years to come. That is the broad overview as I would see it and perhaps Dr. Keane might like to add something on the tax and welfare side.