The latest official State figures show Irish residents now have a collective €126.4 billion in savings sitting in the bank. The record national nest egg comes as total household savings grew by €61 million per day last month, or €500 per month per adult. The medium-term future of the domestic economy may rest on the Government’s ability to prick this bloated savings bubble.
This may not be an easy task for policymakers, as consumers remain nervous. Paschal Donohoe, the Minister for Finance, will need to be clever and flexible as he designs policy instruments to encourage future consumer spending, while staying within the confines of public health imperatives. Ministers don’t want people rushing to the shops all at once as soon as they reopen, as it could cause a spike in virus numbers.
Retail and hospitality are the two sectors of the economy most affected by the Covid-19 pandemic. Any initiative to encourage consumer spending – virus conditions permitting – will surely have to encompass both of these sectors.
If the Government whips away business financial supports later in the year as the vaccine rollout kicks in, support from consumers will be vital in ensuring that thousands of viable shops, bars, hotels and restaurants do not go bust.
When the time comes, one obvious option would be for the State to issue time-limited consumer vouchers to all citizens, redeemable at local shops and hospitality outlets. The vouchers could be packaged as a “thank you” bonus to citizens for their efforts against the virus. The hope would be that consumers, thrilled with a freebie, would then top up the State vouchers with some of their own savings and go on a spending spree.
None of this will be possible unless the virus numbers are brought, and kept, under control. The timing of any initiative will be crucial. It can’t be too early, for public health reasons. It cannot be too late, either, or businesses will be bust before the cavalry arrives.