Ireland’s US multinational cash bonanza is causing a big imbalance |
One way to think about forecasting what may happen in the year ahead was outlined by then US secretary of defence Donald Rumsfeld before the Iraq War. He perplexed journalists at a press conference when he appeared to mangle the English language but what he said was perceptive. Rumsfeld deconstructed forecasting and risk into three distinct scenarios. There are “known knowns”, meaning things we know. There are also “known unknowns”, risks that we don’t yet appreciate but can predict with a certain amount of accuracy because we’ve seen them before. And there are “unknown unknowns”, risks that are so novel and unexpected that we have no idea where they will come from but these may have a massively disproportionate effect.
Keep that framework in your head as we consider how the economy might behave in the year ahead, and what risks we should take into account.
The known knowns are the things we know. In the economic sphere, this is our central case. Given how the economy has been operating in the past few years, we can be sure that the housing crisis will continue. This prediction is based on the fact that the building industry can only build – best case – about 40,000 homes, while the demand is running way ahead of this and we already have an acute dearth of houses.
Immigrants are essential for the country to function but they are also a source of extra demand, because they need a roof over their heads like everyone else. Any easing of pressure on the housing market must have demand as well as supply components. Unless there is a significant fall in immigration, which is........