Martin Ferris
Question:124 Mr. Ferris asked the Minister for Finance his views on the potential economic implications of record levels of personal indebtedness which have now been reached in this State. [10184/07]
View answerTuesday, 20 March 2007
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Written answers
The rise in personal indebtedness must be seen in the context of buoyant economic conditions in recent years, which have been associated with very strong employment growth, increases in wages and reductions in direct taxation. A large part of the increase in personal sector indebtedness also reflects the accumulation of housing assets on the part of households. Moreover, the level of public indebtedness as a percentage of national income has fallen in recent years.
Therefore, provided that the economy and the public finances remain strong, the current level of personal indebtedness should have no significant implications at the macroeconomic level. This highlights the importance of remaining competitive and of adhering to prudent budgetary policies.
As I have pointed out before, both borrowers and lenders need to be aware that interest rates are still low by historical standards. Borrowers need to factor the prospective impact of changes to interest rates into their financial planning. I fully support the vigilance of the Central Bank and the Financial Regulator on the issue of private sector credit and in reminding borrowers and lenders of the need for responsible behaviour. The Government, for its part, will continue to contribute to economic and financial stability by pursuing a prudent fiscal policy.