Dr. Kieran McQuinn:

A number of speakers made a key point about the previous Government's intervention in dealing with inflationary pressures, which is the same point I made earlier. To answer the Deputy's question on whether we achieve overheating, since the domestic economy is growing very strongly, when the unemployment rate starts to go below 5% is typically when we see inflationary pressures building in the domestic economy. We are still a little way off that. The unemployment rate is approximately 7% but given that inflationary pressures are building anyway in the domestic economy, it means whatever supports we give should be as targeted as possible so they are getting to the people who need them the most and, if possible, are not spreading out towards the more general economy where they may contribute to inflationary pressures. In essence, whatever intervention is introduced should be as targeted as possible and reach in particular the people whose incomes and livelihoods are most threatened and challenged by the inflationary period.

Stagflation, which is in effect high inflation and low input, is something that could occur at an international level, certainly, and possibly even in the euro area. We are seeing a pick-up in inflation and euro area output levels typically have not been very robust anyway so there is a greater risk of that occurring, although not so much in the domestic economy because our output levels are quite strong. I do not see stagflation being an issue, therefore, certainly in the short term in the Irish context, but at an international level it is something that could manifest itself.