As the Republic continues its climb up the list of the world's wealthiest nations in terms of income per capita, it is not surprising that the level of personal debt should also soar. A landmark of sorts was passed in 2004 when average debt per capita surpassed average income for the first time.
The trend continues and the Central Bank is expected to voice concerns about consumer debt, once again when it publishes its annual report this morning. But its warnings seem to be falling of deaf ears. The ratio of personal debt to disposable income passed 120 per cent earlier this year and analysts are talking about it topping 140 per cent by the end of 2006.
The most recent credit growth figures show borrowing by consumers continues to grow at near record rates. Much of this can be explained by people taking out bigger mortgages as they chase higher property prices, but borrowing for non-mortgage purposes is also growing strongly. In May, the year-on-year increase stood at 25.7 per cent.
The publication yesterday of a study on personal borrowing, carried out by the Economic and Social Research Institute and IIB Bank, has put some flesh on the bones of the Central Bank's statistics. It found, unsurprisingly, that there has been a significant increase in both the number of adults regularly in debt and also the average amount borrowed. This is coupled with general complacency about personal debt.
More pertinently, it indicates that people are increasingly borrowing to fund short-term expenditure in anticipation of higher incomes in the future. Some 60 per cent of non-mortgage debt is now used to finance current lifestyles rather than investment.
When this figure is put together with some of the other findings, a worrying picture emerges. Up to 150,000 adults are potentially experiencing significant financial strain as a result of borrowings taken out to fund things such as holidays and new cars. Those most under pressure tend to be earning under €25,000 and in the 40 to 59 age bracket.
While this figure speaks volumes about the social changes and pressures that recent prosperity has wrought, this is unlikely to be the focus of concern for the Central Bank. From the bank's perspective what is at issue is the scope of these and other borrowers to keep their heads above water should interest rates rise dramatically or the economy falter and the buoyancy go out of the job market.
The ability of the Central Bank to address this potential problem is limited. Interest rates are set by the European Central Bank and the next move may well be downwards, which will only fuel borrowing here. The only weapon in Dame Street's armoury is to apply what pressure it can on the retail banks to be more responsible in their lending. It has been wielded before and, manifestly, has had only a limited effect. It is time for the banks to face up to their responsibilities in this regard.