Dr. Tom McDonnell:

Fundamentally, there is a range of things we look at when it comes to overheating. Clearly, overheating in terms of the property market would be one we would look at. The rate of growth in employment is arguably not sustainable. The level of growth we have seen is unprecedented. This does not necessarily mean we are overheating, because the concept itself is based on the notion that the economy returns to a kind of equilibrium and if you go too fast, inevitably you are going to get inflation. If you have capacity constraints around infrastructure, which makes it very difficult for the economy to grow out, you cannot get those productivity bonuses. Often simply adding money to an economy is just chasing the same amount of stuff, because of these capacity constraints and that just causes inflation. The budgets we are running at the moment are expansionary and are already fuelling the economy perhaps a little bit too much. We have seen the growth figures for the domestic economy were not amazing for the first half of the year, but modified domestic demand is still growing at a fairly thumping pace and has been for a number of years. Do I personally believe we are overheating? No, I do not necessarily. Again, if we make the right policy choices around dealing with those capacity constraints, and we are able to get more construction workers to build out those houses, or to improve the productive capacity of the economy, then we would not necessarily find ourselves in a position where we are overheating. An economy can continue to grow as long as the space is there. It is about whether we can create the space. The way to do that at the moment are either about more infrastructure or inward migration and, of course, often one will help with the other, but in the short-term, can be counterproductive, in that regard.