Professor Michael McMahon:

With some of the increase in aggregate saving that we see, we also have to think carefully that there is a distribution in all of this. Some households, for instance, continue to get their full income, work from home and have been able to do that. As a result they have been unable to spend because shops have not been open or the usual things they would spend on have not been possible and, therefore, their saving rates are very high. We also have to be wary that at the other end of the distribution there are some people who have lost a lot of income, cut consumption and nevertheless their savings have either gone to zero or they have run down their savings.

To go back to the earlier answer that I gave, it is very difficult at this stage to know how people will react. If people have savings when lockdown measures ease will they immediately rush out to spend them? We do not know exactly how they will react. Similarly, as Mr. Barnes said earlier, ensuring that the policies are in place to provide supports for those people who maybe do not have savings are going to be particularly important to maintain demand in the economy once we get back towards a more normal situation.

Again, without going into a specific policy, when thinking about stimulus, these sorts of issues and targeting measures, for instance, that may encourage spending again in certain sectors, one that was mentioned by one of the Deputies earlier was reducing VAT rates. A temporary measure like that might be targeted at certain sectors to try to reinvigorate demand. Again, that goes back to the point that we have made all along that there is huge uncertainty. At the same time at this point in this recession or economic slowdown we probably have more resources in aggregate, even if they are distributed in a very uneven way, that at least provide some basis for demand to come back when the health officials tell us it is safe to do so.