Mr. John McCarthy:

Confidence is a crucial factor in the current elevated rate of unemployment. The main channel of its impact is through the very high savings rate. Last year, the savings rate was 12.25%, with households saving one eighth of their disposable income. The long-run average is 7% or 8% so there is a precautionary element, with people saving for rainy day purposes. If confidence was to improve, we would see some fall in that, boosting consumption and domestic demand, which is the most tax or employment-rich component of demand. An improvement in confidence would feed through into labour market trends.