The Government has estimated it will have a net fiscal space of €11.3bn available from this year up to 2021.

This compares with a net fiscal space estimate of €8.6bn for the period made in Budget 2016, published last October.

In its Summer Economic Statement published this afternoon, the Government said it will introduce a rainy day fund, which it will start paying into in 2019.

It said it will put away around a third of the available fiscal space in each of the next three years - or about €1bn a year. This would build up a fund to be used in case of a serious economic slow down or major recession.

In 2017, the available fiscal space is estimated at €1bn, rising to €1.2bn in 2018. Thereafter it will rise to around €3bn a year.

The Government's spending plan is to spend two thirds of the additional resource on expenditure programmes, and one third on tax cuts for the next two budgets.

Starting in 2019, the ratios will change, with 46% of the fiscal space going on expenditure programmes, 20% on tax cuts and 34% on the rainy day fund.

Over the five year period, 51% will go on expenditure programmes, 23% on tax cuts and 27% on the rainy day fund.

Over the five-year forecast period, the €11.3bn would be spent as follows - 45.74 on expenditure (€4.16bn on current spending and €1.58bn on capital spending), €2.54bn would go on tax cuts and the remaining €3bn will go into the rainy day fund.

Publishing the Summer Economic Statement, Finance Minister Michael Noonan said it shows that the country's budgetary position is set on a "safe and sustainable path".

The Government said the country's economic recovery is now firmly established with unemployment dropping below the 8% level and the public finances now in a much better position.

Minister for Public Expenditure and Reform Paschal Donohoe said that the extra funds brings total State- backed investment over the term of the Capital Plan to €48bn.

However, the ministers said that a new set of challenges are now emerging. These include the demand for housing - both public and private - mortgage arrears, growing demand for healthcare services and other public services and the need to boost the supply of critical infrastructure.

Further job creation will continue to be at the forefront of Government policy in the coming years and it is targeting the creation of an additional 200,000 jobs up to 2019.

Income tax reform will be a key element in supporting employment growth, the ministers said.

They said that reform for the income tax system - including the phasing out of the Universal Social Charge over five budgets - will be aimed towards middle income earners and supported by the objective of making work pay.

Low and middle income earners are defined as those on incomes up to €70,000 a year.

The Government also said it was committed to introducing a PRSI scheme for the self employed, and keeping the country's corporation tax rate at 12.5%.

"An additional challenge relates to expectations," the two ministers also cautioned at the statement launch.

"While the Irish public can reasonably expect more and better quality public services, lessons from the last decade highlight the importance of ensuring that such improvements are sustainably financed", they said in today's statement.

They said that the Government will not jeopardise the recovery by increasing public expenditure at a pace in excess of capacity of the economy to absorb.

"Prudent fiscal management has laid the foundations for Ireland's recovery and we will build on this," Minister Noonan and Donohoe stated.

A British exit from the European Union could cut Irish GDP by as much as 1.6% by 2021, but the impact on the country would be "containable", Finance Minister Michael Noonan also told today's press conference.

"Over the period 2017 to 2021, we think the net effect on GDP would be somewhere between 0.5 and 1.6%," he said.

Such a fall would be "containable" within the Government's fiscal plans over the period, Mr Noonan added.

"We're pointing out that there's a risk from Brexit, it's not a risk that would damage the general thrust of what we're saying today," the Minister said.

He also said that it is still the Government's "intention to bring AIB to market in first half of next year, if market conditions allow."