Professor John McHale:

Deputy O'Donnell has asked some very important questions. An examination of the performance of the domestic economy, net export economy and the forecasts made by the Department of Finance for these separate economies, shows clear evidence of the highly negative effects of what economists describe as the balance sheet recession in the wake of the financial crisis. The financial crisis devastated balance sheets across the economy, not only the Government's balance sheet but those of financial institutions, businesses and households. This has affected credit availability and led households and businesses to try to repair their balance sheets. One aspect of repairing balance sheets is to cut expenditure and investment, which has been a significant drag on the performance of the domestic economy.