During the 1990s real GDP growth, propelled by the twin drivers of exports and foreign direct investment, averaged 6.6% per annum. This represented a dramatic turnaround after decades of chronic under performance.

Nonetheless, by the beginning of the new millennium, some economists were cautioning that all was not well.

For one thing, they noted that ten years of rapid growth had led to severe capacity constraints. Furthermore, they warned that we had become too dependent on the global economy, and that we needed to build up our indigenous sector to shield ourselves from external shocks.

September 11th 2001 caused a massive external shock. It precipitated an abrupt softening of US demand and a sharp retrenchment in foreign direct investment by US firms. This profoundly affected the Irish economy. To begin with, our exports, once the economy's driving force, were decimated. Between 1990 and 2001 real exports increased by an average of 13% per annum.

Since then, however, they have declined by an average of 2% per annum. It is a similar story when we look at foreign direct investment. In 2000 Ireland had a positive investment flow of 20.1bn and was second only to Luxembourg at attracting inward capital. By 2005, however, the flow had become negative as many multinationals moved their investments elsewhere.

Given this collapse in the two key drivers of our economy - exports and multinational investment . . . the Irish economy might have spiralled into crisis. But Ireland has weathered the years since 2001 extremely well for one simple reason - when external demand faltered after 9/11, the indigenous economy stepped in and took up the slack. In particular, the construction sector expanded massively, with output rising by 58% over the last five years.

This has had an overwhelmingly benign influence on the economy.

To start with, it generated 68,400 new jobs, more than compensating for the loss of 34,000 manufacturing jobs since 2001. But it also added much needed supply to the housing market. The construction sector has delivered record housing completions for 11 years in succession, and has provided an additional 303,052 residential units since the end of 2001. Not only has this accommodated a new wave of immigrants that is now fuelling our economy, it has also helped, at least in part, to check the rise in house prices . . . Sure, price growth has been extraordinary, and has caused unwelcome affordability issues for first time buyers. However, without the increased house building of recent years, market prices would certainly have been higher by now.

But perhaps the most positive contribution of the construction industry has been its part in redeeming our public infrastructure deficit.

Years of under investment had left us with an archaic infrastructure, not just in transport and communications, but also in the vital areas of education, health and recreation. This constrained economic growth and frustrated the development of Ireland's social capital, thereby making infrastructural catch-up a priority. Since the end of 2001 road building output has increased by 46%, while air and seaport construction has gone up by 23%. Important increases have also been achieved in the output of education facilities (up by a third), hospitals and health centres (up 43%), and 'other social amenities' (e. g. sports facilities), which have gone up by 140%.

Despite this positive contribution, many of the commentators who once warned that Ireland was too dependent on the external economy, are now saying that the construction sector - the driving force behind indigenous growth - is too dominant. This week's exchequer returns show that revenue from property related taxes is growing four times faster than total tax growth, and represents an increasing proportion of the aggregate tax take. Certainly, this merits attention, and, with first time buyers facing increasing housing costs, a debate about stamp duty and other property taxes is in order. But for now, as we reflect on the last five years, a key conclusion is that, if the construction industry had not baled us out when exports and foreign direct investment collapsed, the exchequer would be considerably worse off than it is today. In that scenario, arguments about the balance and distribution of public funds would be redundant. In addition to this, it is fair to say that, without the current level of infrastructural building, Ireland's platform for future development would be much weaker.

In time, property and construction will revert to their long term share of economic output as other sectors recover. However, without the building boom of recent years, this broad based growth would have been harder to achieve. The legacy of today's construction activity will be stronger public finances which can be used to fund supportive economic policy, and a public infrastructure capable of sustainable social and economic development.

Dr John McCartney is an economist with Lisney estate agents