Minister for Finance and Public Expenditure and Reform Paschal Donohoe has defended the establishment of a ‘rainy day' fund for future economic shocks, such as during a housing crisis.

Mr Donohoe said the huge collapse in the housing market during the recession contributed to the homelessness crisis, and national finances meant the Government could not respond to the problem at the time.

He said the fund, which he announced the establishment of last October, will help provide a buffer against any future, similar problems.

Mr Donohoe said it would be initiated with €1.5 billion from the country's sovereign wealth fund, the Ireland Strategic Investment Fund, and €500 million will be added a year for the next three years.

He will set aside the first €500m as part of his budget for 2019, which will be announced in October.

Mr Donohoe has said that the medium-term plan is to get the fund up to approximately €8bn.

Speaking on RTÉ’s Morning Ireland, Mr Donohoe said the Government will provide housing solutions for 25,000 families this year, and that funds for public housing is being increased to €1.9bn.

In addition, he said, €110m has been set aside to deal with homelessness crisis.

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Mr Donohoe said he expects there will be more people employed than ever before by the end of this year, and that tax revenue will exceed the previous highest point.

This means, he said, that the Government needs to plan for how to maintain living standards, retain jobs and invest in public services in the future.

Mr Donohoe added that Ireland is better prepared for a banking crisis now than we were in pre-crisis because banks are better financed and a legal framework is in place to protect tax payers in such a situation.

Opposition parties have questioned whether at present is the right time for a rainy day fund, Labour leader Brendan Howlin has said the fund would have no real impact in the event of another crisis.

Mr Howlin said it will be a long time before the money in the fund accumulates to the volume of money that would be needed. 

He told Today with Sean O'Rourke there already is a rainy day fund, the Irish strategic investment fund, and we already have the capacity to put money aside in this.

Mr Howlin said the crying need right now, was for investment in infastructure.

Investing in infastructure would, he said, provide the real stimulis to prevent against another crisis and would be the 'right and prudent thing to do.'

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