Seymour Crawford (Cavan-Monaghan, Fine Gael)
Link to this: Individually | In context

Question 94: To ask the Minister for Finance his assessment of the housing market; and the levels of personal debt and their capacity to destabilise economic progress. [19395/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

Residential construction has grown rapidly in recent times. Supply of housing has increased in response to strong levels of demand, which, in turn, have arisen from a number of fundamental demographic and economic factors. Total completions in 2005 reached an historic high of about 81 thousand units. Construction employment growth was also particularly strong in 2005 and now accounts for one in eight jobs.

As acknowledged in the Stability Programme Update published with the 2006 Budget, the fact that construction presently accounts for an historically high proportion of economic output and employment implies that the economy is vulnerable to any shock affecting this sector.

A high proportion of household indebtedness in Ireland relates to borrowing for house-purchase which, in turn, involves the acquisition of an asset for the households. In the same way, borrowing by the business sector generally underpins investment, and the creation of business assets yielding future income. It therefore reflects the strong performance of the economy and confidence in Ireland's economic prospects.

While the pattern of mortgage growth and associated debt levels in the economy are supported by a range of fundamental factors such as growing employment, rising real incomes, favourable demographics and low inflation and interest rates, the Central Bank at the publication of their latest Quarterly Bulletin, highlighted the need for borrowers and lenders to take account of the current very low level of interest rates and the fact that this situation cannot continue indefinitely. I share the view that both borrowers and lenders need to factor into their financial decision-making the prospective impact of potential changes in the future economic environment.

Finally, as far as overall economic and financial stability is concerned, an overall measure of credit encompasses both public and private sector credit and debt levels. The Minister for Finance has a key role in this regard in ensuring prudent management of the budget and overall sustainability in the public finances. In this context, Ireland's fiscal performance is among the best in the developed world with Government indebtedness the second-lowest in the euro area. Responsible budgetary policy has made a significant contribution to economic performance overall and to the achievement of record employment levels.