Institutional Sector Accounts Non-Financial and Financial 2023

Household Disposable Income

Total Disposable Income (B.6g+D.8) of households and non-profits grew by 11% (€16.6bn) in 2023. However, the implied deflator for personal consumption was 8.1%, meaning that extra income was required to pay for the same volume of consumer goods and services in 2023. 

Here we look at the changes in composition of disposable income at current prices. Figure 1.1 shows the components (columns) and the change in Disposable Income itself (line). The graph illustrates the difference compared to the previous year, rather than the absolute amount of each item. In most years, the biggest contributor to the change is wages and salaries paid to employees and in 2023 this accounted for €13.8bn of the €16.6bn increase. There has been a corresponding but smaller increase in the taxes paid on this income (D.5) which reduces the Gross Disposable Income. Social contributions (such as Pay Related Social Insurance (PRSI) also increased faster than social benefits (such as pension payments). We can also see that net investment income is a growing contributor to household incomes, as interest rates started to rise and households still had significant deposits built up during the COVID-19 restrictions. 

Income of Employees

Figure 1.2 shows the Compensation of Employees (CoE) in more detail. The Figure illustrates the proportion of total labour costs borne by each sector in each year. As well as wages, CoE encompasses benefit-in-kind and other labour costs.

The biggest share of CoE comes from Domestic Non-Financial Corporations (NFCs, S11b), who paid 38% of the total, a similar proportion to ten years ago. The past decade has seen growth in the proportion paid by foreign-owned NFCs. This has gone from 22% in 2014 to 29% in 2023. The growth in household income from foreign NFC has been countered by a declining share paid by General Government (from 25% down to 22%) and by domestic Financial Corporations (4% down to 2%) over the last ten years. As we saw in Figure 1.1, CoE overall has been increasing, so while the share of the total paid by some sectors has declined, its total paid in euro has increased.

If we add in foreign-controlled Financial Corporations (S.12a) to the foreign-controlled NFCs, in the latest year 34% of pay to workers came from branches and subsidiaries of overseas corporations. Clearly household income, as well as tax receipts by government, are very significantly affected by foreign multi-nationals' activities in Ireland. 

Household Saving Rate

Both income and expenditure rose in 2023, and the difference between the two (gross saving, B.8g) was the same (€22bn). The household saving rate is the saving divided by the income; the rise in income meant that €22bn in saving was a smaller proportion in 2023 than in 2022.  The saving rate was thus 13.6% in 2023, down from 15.1% in 2022. 

Figure 1.3 below shows the saving rate over the past 13 years, alongside the saving rate for the Euro-area as a whole. Ireland's saving ratio was around the same as that of the wider Euro-area  for most of the time, but in 2020 and 2021, Ireland's ratio was above the overall Euro-area's. In 2022 and 2023 it has fallen back to around the same level as the rest of the area, and to its pre-COVID-19 level. 

Household Debt to Income Ratio

Figure 1.4 charts the movement in income and debt for the period 2001 to 2023. The debt to income ratio is a key indicator of the sustainability of household debt. A lower debt to income ratio means that if interest rates increase, households are more likely to be able to manage the additional burden: the loan liabilities are less and so the interest is lower, or the disposable income is higher and so there is more money available to make mortgage payments.

The balance sheet position in relation to household and NPISH debt (Liabilities - (AF.4) Loans) increased in 2023 from €143bn to €147bn. At the same time Total Disposable Income increased even more, from €148bn to €165bn. This caused a fall in the debt to income ratio from 97% to 89%. 

Figure 1.4 also shows the debt to income ratio for the Euro-area as a whole. We can see that the ratio for Ireland is generally higher than that of the wider area. It is now close to the aggregate, but was more than double the Euro-area rate in the period 2005-2011. Among euro countries, the ratio ranges from 181% in Luxembourg to 41% in Slovenia.

Use of Household and NPISH Saving

Gross household and NPISH saving (B.8g) was €22bn in 2023, as illustrated in the line in Figure 1.5 below. The columns in Figure 1.5 illustrate how that saving was used. Saving adds to wealth in the form of real assets, such as houses, and financial assets such as deposits. Saving is also used to reduce liabilities, such as loans. Figure 1.5 shows the transactions in loans, i.e. increases (+) or decreases (-) in each year (excluding price changes). It is important to make the distinction between balance sheet measures and transactions: Figure 1.4 above illustrated the balance sheet position of the outstanding stock of loans to households. 

For much of the last 13 years, loan liabilities have been reduced (orange bars are above the axis for most of 2011-2020), but in the last three years, households have been borrowing more than they have been paying back (orange bars are below the axis). In 2023, loans to households increased by €5bn. At the same time, deposits also increased by €5bn, so while some households were taking on extra debt, others were putting money aside at the same rate. Deposits were already increasing between 2016 and 2019, and the arrival of COVID-19 restrictions accelerated that trend in 2020. Since then they have been slowing, and are now accumulating at the same rate as the middle of the last decade. Pension saving and insurance products (including life insurance) accounted for €7bn in saving in the year, even more than deposits.

By far the biggest single use of saving in 2023 was capital formation, which for households is mainly in the form of homes. In 2023, this accounted for €17bn up from €11bn in 2022. Improvements such as house extensions were €7.6bn in the year, and 32,582 new dwellings were completed in 2023, many of which were bought by households (some improvements and new dwellings were investment by Government or Non-Financial Corporations). The Residential Property Price Index was 3.1% higher at the end of 2023 than a year previously so price rises also account for some of the additional investment. The €17bn invested in these assets in 2023 exceeds the total for all four years 2011-2014 (not adjusting for inflation).