SSIAs to spark €14bn spending spree

HOLDERS of Special Savings Investment Accounts (SSIAs) will go on a €14 billion spending spree when their accounts mature in two years’ time, splurging on property, cars, holidays, home improvement and holiday homes.

A report prepared by Goodbody stockbrokers forecasts the equivalent of a ‘gold rush’ with an 11-month spree as accounts mature between May 2006 and April 2007.

SSIA holders will pocket an average of €13,700 and those who contributed the maximum €254 per month are in line for windfalls of almost €20,000.

A massive €6bn will be released during April 2007 alone, when 42% of accounts will mature. This bubble arises because of the large number of people who opened their SSIA at the last minute before the scheme closed in April 2002. The final payouts will be just in time for the next general election, expected in June 2007.

The Government’s 25% contribution will cost the Exchequer €2.8bn, far in excess of the e1bn originally predicted by Finance Minister Charlie McCreevy.

The spending boost is expected to increase economic growth by 2% in both years. Goodbody has revised its forecasts for economic growth from 4.8% to 6.7% in 2006 and from 4.7% to 6.2% in 2007.

But the boom will be temporary, according to Goodbody director of research Colin Hunt. In 2008, as the windfall depletes, growth figures will drop dramatically to 1.5%, the lowest since 2002.

Some €4bn of the €14bn is likely to be invested in property, with a staggering €1.6bn earmarked for holidays. If account holders splash out a predicted €1.13bn on cars, it could lead to long waiting lists for new cars, said Mr Hunt.

There could also be delays in hiring tradesmen as savers treat themselves to house extensions.

But the €14bn injection, which equates to almost 10% of the country’s annual income, was unlikely to stoke up inflation, according to Mr Hunt, though he did concede there could be inflationary pressures on property and construction.

“The SSIA is unprecedented in scale in Irish economic history and we’ve never seen a windfall quite like it.

“There’s no precedent for it either here or abroad and it will have a very significant impact on overall economic activity,” said Mr Hunt.

Fine Gael deputy leader Richard Bruton, Labour finance spokeswoman Joan Burton and Green Party finance spokesman Dan Boyle all warned of heightened inflation when the SSIAs mature.