Bernard Durkan (Kildare North, Fine Gael)
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109. To ask the Minister for Finance if the provision of affordable and local authority housing is deemed by the Central Bank to be an overheating issue in the economy (details supplied); and if he will make a statement on the matter. [44585/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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The provision of affordable and local authority housing is a matter for my colleague the Minister for Housing, Planning and Local Government.

Governor Lane addressed the issue that the Deputy is referring to in a pre-Budget letter to me on 3 August 2018.  In his concluding paragraph, he stated, “Finally, the additional spending pressures associated with an increase in public investment require offsetting balancing fiscal measures if the economy is operating in the neighbourhood of full capacity.  Otherwise, there is the prospect of short-term crowding out, with exporting sectors especially affected by the loss in competitiveness associated with a deficit-financed surge in public investment. In contrast, a fiscally-neutral increase in public investment would deliver the long-term gains without inducing short-term overheating." The Governor's letter is available in full at the following link:

www.centralbank.ie/docs/default-source/publications/correspondence/oireachtas-correspondence/03-august-2018-pre-budget-letter-to-minister-for-finance-paschal-donohoe.pdf. 

The issue was also addressed by the Central Bank, in a recent Central Bank Quarterly Bulletin article: “Irish Government Investment, Financing and the Public Capital stock”.  This article considered the appropriate financing of increased public investment, including the provision of affordable and local authority housing, in the context of an economy, such as Ireland's that was approaching full capacity. The conclusion of the article was that any increase in public investment should be financed in a budget neutral manner.  This would mitigate short term overheating risks arising from the unavoidable boost to aggregate demand while maintaining the long-term benefits of such investment.  The article is available in full at the following link:

www.centralbank.ie/docs/default-source/publications/quarterly-bulletins/quarterly-bulletin-signed-articles/irish-government-investment-financing-and-the-public-capital-stock-(hickey-lozej-and-smyth).pdf?sfvrsn=2.