Professor Alan Barrett:

Senator Byrne asked about capital expenditure. I cannot give a very clear answer, but I can talk about principles and a bit of history. We all know that in an austerity programme capital spending is the first thing to go. Obviously it is easier for the Government not to do things than to stop doing the things it is doing. With the austerity programme in the 1980s there was very little capital investment in that period, which acted as a blockage to economic growth in the late 1980s because the problems became so acute. We were somewhat lucky because it was in the late 1980s that the European moneys came in and, in a sense, provided the sort of money required to carry out the sort of investment the Senator mentioned. There is a real concern that politics being politics capital expenditure gets depressed and it could well happen that we overdo it. We need to be clear and careful that we do not do this.

What is needed is a much more strategic approach to the austerity programme. A group such as ours is sometimes concerned that the Government's approach might simply be to make the savings wherever they can be achieved - that it would not be done on a strategic basis, as we would wish, but more in a pragmatic way. We would be urging that these issues be considered much more carefully than has probably happened to date.