Written answers

Thursday, 4 July 2024

Photo of Richard BrutonRichard Bruton (Dublin Bay North, Fine Gael)
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117. To ask the Minister for Finance if he has considered any innovative policy measures to mobilise the sustained higher levels of saving among Irish consumers post-Covid; and if he will make a statement on the matter. [28639/24]

Photo of Jack ChambersJack Chambers (Dublin West, Fianna Fail)
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I am pleased to report that Irish households are, on aggregate, in a strong financial position. Irish household deposits increased substantially during the Covid-19 pandemic, as public health restrictions limited expenditure whilst government supports helped maintain the link between employers and employees and protected household incomes. At the height of pandemic, the saving rate, the share of household income that is not used for consumer spending, peaked at 32 per cent. While the household savings rate has since returned to more normal levels it remains above the pre-pandemic level.

Throughout the period of elevated inflation, the Government’s packages of cost of living supports have helped safeguard households from the corrosive effects of inflation. When adjusted for inflation aggregate household disposable incomes increased by 3 per cent between 2021 and 2023. These supports also protected household balance sheets. Indeed, households continue to hold around €154.4 billion in deposit accounts as of April 2024, an increase of 44 per cent compared to the same period in 2019. These savings could be used to boost economic activity through investment or consumption into the future through the financial intermediation system

Looking ahead, household balance sheets are expected to remain in a strong position reflecting the strength of the labour market alongside the significant easing in inflation pressure. Any further policy measures in this space will form part of the normal budgetary process. In this regard, I will set out the broad parameters for the upcoming Budget in the Summer Economic Statement this month.

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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118. To ask the Minister for Finance the extent to which he proposes to ensure the protection of the public finances in the compilation of the forthcoming budget while at the same time addressing issues such as the impact of inflation on family budgets; if he intends to ensure that this economy remains competitive and at the same time addresses concerns such as vital infrastructure throughout the country; and if he will make a statement on the matter. [28581/24]

Photo of Jack ChambersJack Chambers (Dublin West, Fianna Fail)
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This Government has balanced careful management of the public finances with addressing the important issues facing our country. We will continue to take this prudent but supportive approach in the forthcoming budget. As the deputy notes, inflation has been a particularly significant challenge for families in recent years.

Inflation reached multi-decade highs in 2022, peaking at 9.6 per cent in June 2022. This was extremely challenging for households who saw their purchasing power significantly eroded as result. Since then, enormous progress has been made in reducing inflation with headline HICP inflation of just 1.5 per cent in June. This is the lowest rate since April 2021.

Key to this moderation has been the partial reversal of energy prices from extremely high levels. Consumer energy prices in June are estimated to have decreased by 5.6 per cent compared to June last year. This decline captures the fall in wholesale energy prices being passed through to retail gas and electricity bills. I expect further cuts to take place throughout this year as this process continues.

However, I am conscious that pockets of inflationary pressure still remain, particularly in domestic sectors, especially for certain services activities. In part, this is due to capacity constraints in the economy. The labour market is essentially at full-employment and supply-demand imbalances are evident in a number sectors, including housing, a key policy priority area for the Government.

Throughout this period of high inflation, the Government has been at the forefront in supporting the most vulnerable. By responding swiftly and decisively to the cost of living challenges, the Government has helped to mitigate the impact of inflationary pressures on both businesses and households. The temporary and targeted nature of the measures taken by Government have been designed to avoid adding to the inflationary burden whilst providing support to those most in need.

Looking forward, I expect the moderation in inflation to improve households’ purchasing power and support increased consumer spending over the year.

Government will set out the parameters for Budget 2025 in the Summer Economic Statement, which will be published shortly.

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