Professor Karl Whelan:

I will go back to the analogy of what happened before the 2008 crash. By 2007 we were building 100,000 residential units per year and people who remember that time will recall that kids were dropping out of school to become builders and that there was a song about the breakfast roll. It was very visible throughout the country that the construction industry was dominating. It went to the point where we were importing lots of builders from eastern Europe to help build these units, and then those guys had to live somewhere as well. We ended up with costs and wages going up a lot and the economy was overstimulating. We started to see manufacturing businesses leaving Ireland because costs were too high here as a result of the fact that we were spending loads of money building houses and selling them to each other.

We will not end up with 100,000 residential units being built per year again but we have relatively ambitious public housing plans, we will see a private sector response and we have plans for retrofitting, building wind farms and constructing further motorways, as well as plans for expanding public transport. Builders have to do this work and we could end up with a more varied portfolio of capital spending than there was in the mid-2000s but we will still end up with the economy overheating and we will drive away some of the same types of businesses that were driven away before. When that bubble popped the last time it was a sore point that so many of those businesses left and it was a slow process to win a lot of those jobs back. The economy can get a bit unbalanced at times and setting public capital spending to meet priorities is important, but we have to think about our capacity to deliver those priorities without triggering inflation.