Professor Karl Whelan:

Let us be honest. Ours is a small, open economy and most of the goods we buy are coming in from the rest of the world. We do not set those prices. The Government has no magic formula for getting low gas or oil prices. Being part of the euro means some of the tools we had in the past whereby we could have focused on domestic inflation are gone. We do not set our own monetary policy, we cannot set interest rates high because inflation is high in Ireland and we do not have an exchange rate that we can adjust. There are price and wage controls but, historically, they do not really work, and there is lots of evidence from the 1970s of price and wage controls being introduced and not working. We have a micro-study of our own going on right now with regard to rent controls, which seem to be a bit of a leaky sieve in that rent inflation seems to be proceeding apace, even with the various controls that are in place. That is relatively consistent with what has happened with price and wage controls in the past.

We are left with a sort of boring answer, which is prudent management of fiscal policy and to try to avoid using fiscal policy to have the economy get over-stimulated. When we look back at the period of 2008-09 or prior to that, perhaps a lot of the public expenditure and capital expenditure that was done during that period - all of the motorways that were built and so on - could have been done at a slower pace and we might have had more money left later to smooth things out. That is a major instrument that we have but we are a bit like a golfer with one club.

In terms of the housing market more generally, we have macroprudential policies in place to try to prevent a collapse. Borrowers are not given 100% mortgages anymore and they have much more equity in their homes than they did, so we are less likely to get into a negative equity situation. We are not quite on the verge. I do not think the economy is as unbalanced or on the verge of collapse as it was back then, but, at the same time, if we do see this jump in inflation, I do not want to overstate how much control the Government really has of it.