Dr. Kieran McQuinn:

When we are thinking about fiscal and budgetary policy, we focus on several things. One is if the Government wishes to spend more money, whether we have the wherewithal to do that. An equally important consideration is where we think the economy is at. Do we think the Government should be seeking to stimulate economic activity or to contract it? That question depends on where we see the economy and if we see it performing at or near its potential. Regarding the first matter, and we made this point in our submission on several occasions, because the inflationary situation is having such a disproportionate impact, especially on incomes in the lower decile category, there is scope for the Government to take additional measures to help households in the context of household incomes, etc. What we have stressed, however, and this is where the second issue comes into play, is that these measures should be targeted. This is because the Irish economy is still growing strongly. We believe it will grow strongly this year.

Even if we strip out the contribution of the multinationals, we believe there would still be relatively strong growth as far as the domestic sources of such growth are concerned. As a result, especially in a period when inflation is strong, the Government should not be adding to those inflationary pressures with its spending. The most prudent thing the Government could do now is to direct what resources are there, and, as we said, there is scope in this regard, to those households that need support the most and ensure that is done in the most targeted fashion. We still believe the economy will grow this year and next year, so there is no need for the Government to try to stimulate growth or to try to ensure that the economy continues to grow during this period. It is going to grow. Any measures taken should be as targeted as possible in the context of minimising the inflationary consequences of those actions.